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The combined net income of Canada’s Big Six banks in 2010 exceeded net income from the previous year by more than $6 billion, and with these strong earnings there are continued opportunities for growth and innovation, despite a tougher and more complex regulatory environment, says a report from PwC.
Canadian banks will be focusing their attention on pursuing growth, managing risks and investing in innovation, state the authors of Canadian Banks 2011: Perspectives on the Canadian banking industry. This year, the annual report includes perspectives from leading financial services investment managers and analysts along with a video with PwC’s banking leaders at www.pwc.com/ca/canadianbanks
“Each of the Big Six are pursuing different growth strategies, through a combination of international acquisitions, a focus on core domestic operations or greater emphasis on product offerings such as wealth management. In fact, Canada is not alone in seeking out international growth opportunities, according to a recent PwC survey of banking and capital markets CEOs called Keeping Pace with Accelerating Change. A total of 61% of respondents think that emerging markets will be more important than developed markets to their organization’s future,” says Diane Kazarian, national leader of the banking and capital markets practice at PwC.
Overall, Canada’s Big Six banks’ assets outside of Canada and the US range from 2% to 26%. However, with broader geographic expansion, comes greater global regulations and risk, the report notes.
“Last year Canada’s six largest banks weathered a year of economic and regulatory challenges,” Kazarian adds. According to our global banking and capital markets CEO survey, 80% of CEOs see over-regulation as the biggest threat to their growth prospects.
“To grow and compete both at home and internationally, Canada’s banks will have to innovate to create new efficiencies in the cost of their networks to acquire scale benefits either through outsourcing or joint venturing. The quick pace of emerging new technologies is also forcing Canada’s banks to embrace innovation with an emphasis on customers,” says John MacKinlay, partner and financial services advisory leader for PwC. “Mobile banking, leveraging social media prospects, and changes in payment technologies are all areas of opportunity. These and other emerging technologies will allow the banks to engage with their customers in ways not possible in the past,” MacKinlay adds.
However, the consumer has its own challenges. Statistics Canada released figures earlier showing Canadian debt-to-income ratio is now higher than in the US for the first time in 12 years. As customers willingness to spend and borrow decreases, so too could banks’ earnings growth in these areas, the report says.
“There are opportunities for those who can anticipate how business will change and creatively search for value. The most successful banks are likely to be those that can make the most of their principal competitive strengths and focus on innovation to drive further growth,” says MacKinlay.
For more information and a copy of the report, visit: http://www.pwc.com/ca/canadianbanks
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For further information:
|David Rowney, PwC
Tel: 416 365 8858
email: [email protected]
Kiran Chauhan, PwC
Tel: 416 947 8983
email: [email protected]