Archive for the ‘Uncategorized’ Category
The size of the Canadian mortgage market approaches $1 trillion
The state of Canadian finances is still the envy of the world, yet there continue to be areas of concern that pop up. This statistic caught my eye. The trillion dollar figure works out to be $100,000 on average for every bankable household in Canada. The average is deceiving though because there are many homes with no mortgages.
The other statistic there is that about 38% (although the numbers in the article do not add up) of mortgages are securitised and held by others as investments. This could be hedge funds, pension funds and other investment funds. Obviously any impact on the housing market as referred to in the article could have impacts on the value of those securities.
House is Banks’ next sore spot (in Canada)
Canadian households have about $1-trillion of home loans outstanding, the latest statistics from the Bank of Canada show. Of that amount, about $495-billion is held by the chartered banks on their balance sheets. A further $300-billion of mortgages mostly issued by the banks has been made into mortgage-backed securities.
UK Bank mortgage volumes down
An interesting stat that reflects a new normal when people are consolidating and de-levering. However the percentage decrease of 18.9% since July 2009 is not so dramatic as the headline in the Telegraph suggests.
Banks approve just 1,000 mortgages a day | Daily Telegraph
It is down from 34,575 mortgages the previous month and the situation has got significantly worse compared with last year, with levels down from 41,353 mortgages in July 2009. The latest figure is half the amount of mortgages approved before the credit crisis hit.
Smart local and interactive advertising from ING
A very smart interactive ad from ING Direct Canada that ran in Toronto metro hall. Those are coins which are removed to bring out the full ad. I would speculate the coins add up to $185.00 which is the theme of www.your185.ca
Aceto does live demo of iPad app that comes with ING Thrive checking
Peter Aceto introduces the new Thrive no fee checking account
eBanking – free checking from BofA
BofA have come out with a pure non branch checking account that has the right price, i.e. free. Everything is done via online or ATM. This type of account is gaining momentum. Its not a game changer but with a no fee price tag, it will change behaviours of some customers.
eBanking
Ideal if you do most of your banking online and at the ATM, instead of with a teller.
Learn more about eBanking>>
Monthly fee waived when:
- Deposits and withdrawals are made electronically or at our ATMs
AND- You choose online paperless statements through Online Banking
Otherwise, $8.95 per month
A status report on the banking crisis 3 years on and evidence of banks as financial utilities
This headline caught my attention this morning.
Three Years on, Is the Financial Crisis Over? | Yahoo Finance
Three years ago to the day, BNP Paribas, the French banking giant, suspended redemptions on three funds, marking the beginning of the credit crunch.
Sure enough it was 9th August, 2007 I posted on it and noted that the US sub prime problem was going international and pointing to deeper rooted problems with banks.
Relevance to Bankwatch:
Two sets of recent events underscore the heightened risks Banks are taking to improve profits. Speculative investment in commodity markets amongst a few Banks earlier in the year, and now the international impacts of the US Sub Prime all suggest that some Bankers are losing sight of that primary Banking mantra – ‘know your customer’.
On the weekend there were two significant developments affecting American banks that result from the last 3 years of fallout.
US to pay big sums for Wall St tip-offs
Much of the turnaround reported this week is down to tighter cost management, disposals and a lessening of the worst news, such as impairments. On the plus side for investors, the new business trickling in is more profitable because of the fatter margins it offers. More than one chief executive this week has bemoaned the lack of appetite for fresh loans.
The FT’s point is that the length of the 4 UK banks interim reports are over 800 pages in total. The RBS one is 303 pages alone. This is indicative of the focus on maintaining the governance associated with government ownership and supervision and the associated costs and time commitment for a quarterly report that is longer than many annual reports.
Relevance to Bankwatch:
Banks’ response to the crisis has really been as expected and quite defensive to date. It has been one of continuing with branding strategies and manage costs down. Stay below the radar and hope it all gets better. My take back in early 2009 was that we would see a ‘great unwinding’ of debt problems in banks. I had no idea how back then but the answer has been Quantitative Easing or central banks taking over banks loans and in the UK case taking over bank ownership in lieu. My prediction then was:
This will effectively split the financial community into two distinct sets:
- financial utilities – significant operating restrictions in light of implicit and explicit government guarantees underpinning the business
- risk takers – not clearly defined as yet – will be dependent on regulation applicability
We have seen lots of 1. and the RBS report highlights the workings of a bank as a regulated utility. The word ‘innovation’ appears no-where in the document. A search for ‘new product’ shows once as a “we continue to focus on new products to diversify …etc etc”. It is generally a stuffier than usual document and one that reads to me as written for the regulators.
There are some germs of evidence of 2. showing finally with the likes of Metro Bank and Virgin Finance springing to mind. Less evidence in the North American market to date, and backwards progress with the demise of Wesabe. In terms of significant players, Lending Club and Mint spring to mind as some evidence.
Banks reliant on trading revenue will suffer
Banks whose stock value is partly predicated on trading profits will come under serious pressure in the next while.
US banks braced for slump in profits | ft.com
Trading activity picked up a little in recent days after the release of European banks’ “stress tests”. However, deepening fears of a permanent end to the trading boom that supported financial groups’ earnings after the financial crisis are prompting some banks to consider laying off traders.
“July was a miserable month for trading,” one senior banker said. “If August and September don’t rebound sharply, banks will be forced to cut jobs.”
The squeeze in trading profits highlights the rising importance of groups’ consumer and commercial banking operations, whose performance is improving as the economy heals.
From the same article I came across this statistical review of investment shifts since before and after the crisis. It seems to show that net assets have relatively shifted to cash assets, and that equities are still 25% below 2007 values.
‘Open Canada’ | Report from Canadian International Council
Countries are still working out their responses to a globalised and inter-connected world. This report from the Canadian International Council is an absorbing example of an approach for Canada. Its the more absorbing because Canada sits on one of the longest borders in the world, with the United States. One of the early themes is the reliance of Canada on free trade amongst US, Canada and Mexico, yet trade with the US is dropping sharply since 2000 as the US became more protectionist of its borders. Exports to US have dropped from $37bn to $26bn in the period 2000 to 2008. Considering the US is Canada’s largest trading partner (20% +/-) this is an important trend.
Another related theme is that for a relatively small country like Canada it must build on its strengths and bring a pragmatic approach to its dealings with other countries. In real terms this means pick the strengths that are beneficial and abandon those that are not. It turns out the US Canada border negotiations broke down because of Canada’s stance on protection of privacy and sharing of fingerprints, retinal scans etc. At what cost does a Canada stick to such principles?
On the other hand, and more relevant to this blog, Canada has some real enduring strengths in fiscal conservatism and management of financial institutions.
Open Canada | CIC
This means Canada will have to work that much harder to find spots where we can exercise leadership, such as the Arctic Council, yet another Canadian creation, and global financial regulation. Today, our international finance officials stand out the same way our foreign service officers once did.
The financial crisis has presented us with a mini-Suez moment. We have our own interests at stake and helping our friends and allies find a way out of the jam serves those interests alongside the greater good. We can show them what we learned digging ourselves out from 20-plus years of deficits and how we did it without igniting riots in the streets. We can show them how prudent financial regulation and market principles can co-exist. We can apply our knowledge and credibility to the development of some kind of ‘peacekeepers’ of the financial order.
Relevance to Bankwatch:
There are some quite deep and genuine themes that Banks could learn from and lever in this report. For starters, if Canadian finance is as strong then why are more takeovers/ integrations/ partnerships not taking place between Canadian and US financial institutions.
Next up is Innovation. Canada fares badly here.
Yet it turns out three Canadian banks somehow made the list of innovative Canadian companies. I must find the list, but either we don’t understand innovation, or we should lever this strength.
Innovation is the greatest generator of wealth in today’s global economy. Ideas have replaced industry on the commanding heights of the postindustrial economy. Yet in a recent ranking of Canadian companies, the top dozen consisted of eight in the resource-extraction business, three banks and only one (Waterloo’s Research In Motion) that could be described as a homegrown innovation success.
By its nature this report is aimed at Government and the approaches they should consider, but Banks and particularly Canadian banks with their relatively large size within the Canadian economy have some role to play here.
CEBS bank stress tests being announced live
FT have been running the CEBS announcement on European bank stress test live since 16:45 BST. Biggest surprise the the small number of failures. One Spanish bank is all I picked out so far. Portugal, Italy all passed. I have seen nothing on Greece as yet. More later.
