TORONTO, March 4, 2011—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: www.pwc.com/ca/canadianbanks
How concerned are you about the following potential economic and policy threats to your business growth prospects?
Source: PwC’s 14th Annual Global CEO Survey 2011
Base: All respondents (1,201)
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See www.pwc.com for more information. In Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 5,300 partners and staff in offices across the country.
“PwC” is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these firms form the PwC network. Each firm in the network is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way.
PwC Name Change
PwC has changed its name from PricewaterhouseCoopers to PwC in the fall of 2010. 'PwC' is written in text with a capital 'P' and capital 'C'. Only when you use the PwC logo is the name represented in lower case.