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In the recent comments at the bottom of the Canadian Broadcasting Corporation (CBC), you can almost smell the words of anger towards large Canadian banks Publish stories about rising bank fees.
But this week, as the bank announced another round of astonishing results, the news once again reminded people that although the pandemic was disrupted, the impact of COVID-19 did not lead to the economic disaster that many people were worried about at the time. Some people say that banks are partly responsible for this positive result.
Although the story of bank charges attracted online outrage, CBC’s comment below Bank profit report Be more nuanced.
Love them, hate them
“You know, it’s funny. People seem to love and hate banks at the same time.” Hilliard MacBeth, senior financial adviser in Edmonton and author of a frustrating book on Canadian Real Estate Say. When the bubble burst.
During his 42 years in the personal finance business, MacBeth has met many people who deal with Canadian financial institutions. He said that as long as banks get loans when needed, Canadians’ criticism of banks will be surprising. He also believes that if Canadians understand the situation better, they may become more important.
Watch | The customer tells the information about the increase in bank charges:
During the pandemic, several customers of large Canadian banks were frustrated by the increase in bank fees, and they approached Go Public. After each of the five large banks reported billions of dollars in profits in the first quarter of this year, fees rose. 2:05
He said: “I don’t think the public knows it very well.” “They just heard that’you are approved for this loan’ and they are happy.”
Of course, some of the people who like Bank of Canada this week include those who invest in Canada. And, whether you know it or not, you are also an investor. Canada and Quebec’s pension plans account for a large share of banks. The same is true for mutual funds, life insurance companies and other financial groups, which promise to pay future payments based on the money you set aside today.
Jim Shanahan, a financial equity analyst at Edward Jones, said strictly from an investor’s perspective that these banks have shown their merits, rebounding from last year’s lows to new highs. You can see by clicking on the chart above, as if an epidemic has never happened. He said that taxpayers should be grateful.
Shanahan said: “By holding stocks, long-term long-term investors have been rewarded. Most of their transactions are at or near historical highs.”
He works at the Edward Jones headquarters in St. Louis, Missouri, where Canadian banks have a reputation for conservative risk management. In the 2008 financial crisis when they did not need American bailout, and in the crisis triggered by the pandemic, this has paid off.
Solid support
He said in a telephone interview: “I think Canadian taxpayers, businesses and other stakeholders should be satisfied with the bank’s performance, which provides very solid support and outstanding performance in the context of the very weak Canadian economy. “
Although wall-to-wall advertisements point out how much they love you, The bank is not your mother. Like all other for-profit companies, they are also profitable. This does not mean that if we complain loudly, they will ignore criticism of charges or other things we complain about. Of course, as people interviewed by Go Public pointed out, raising fees while making amazing profits is not particularly good for their valued customers.
The frequent suggestions that readers make about dissatisfied customers turn to credit unions or one of the low-fee alternatives (owned by big banks) often show people’s determination to stick to the big bank’s choice. The fact that we continue to use them seems to support MacBeth’s position that Canadians still tolerate bank behavior.
McBeth said: “The only way for Canadians to lose their relationship with the bank right now is if the bank starts foreclosure and makes people bankrupt with their credit cards, HELOCS and everything else.” “It doesn’t seem to happen. “
Some people complained about excessive government spending during the pandemic, fearing that it would increase tax revenue. But MacBeth believes that without this support, Canada will really be on the verge of collapse.
He said: “This happened almost a year ago, and then the Canadian government carried out a large-scale transfer of income and dollars to households. If you think about it, this is essentially a transfer to the bank.”
As the bank reported this week, because Canadians paid off their non-mortgage debts, their loan losses were negligible.
Taxpayers get some credit
As many banking experts will point out, Canadian banks are not only successful because they are so cautious and wise. This is also because taxpayers have their own backing, and government regulators insist on doing so.
As Shanahan pointed out, Canadian banks have higher reserve requirements than American banks to help them and their borrowers weather the economic downturn. He said that as these requirements increase, one can expect increased dividends and stock buybacks. Executive bonuses will reappear on the table.
However, as with the recent top priority of the Canadian economy, as Canadians borrow and buy real estate, even if they pay off other loans, banks have been bearing the wave of rising housing prices. Except for banks that borrow money to buy funds, many Canadians don’t think too much, but again, taxpayers are there to provide banks with effective mortgage subsidies.
MacBeth said: “In Canada, CMHC is the main risk taker, and banks can only retain all profits.” “They are taking loans from potentially productive things and offering them to families who buy real estate that they really can’t afford. Provide more loans.”
Moreover, many people, including the Central Bank, have said in the past that if this trend continues, the increase in prices of using a large amount of our wealth for non-productive real estate may not be the best for Canada or its banks. select. The pandemic is over. In contrast, although the impact of rising costs is annoying, the impact on the economy is very small.
Follow Don Pittis on Twitter @don_pittis
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