Innovation. Modernization. Reinvention.
Perspectives on the Canadian banking industry
The 2017 edition of our report on the Canadian banking sector finds the Big Six banks delivering robust results despite facing a host of competitive, financial and operational pressures. Disruptors like FinTech companies, technology giants and other non-traditional competitors continue to impact the market and challenge the status quo. The largest upgrade to Canada’s payments infrastructure in decades is imminent. The regulatory burden and associated costs continue to grow, along with increased customer expectations for seamless, connected services.
And the banks are moving with urgency by embracing disruptors and making substantial investments in technology and new ways of working in a digital world. They see FinTech firms as partners and collaborators to enhance customer experience, and they’re focused on improving operational efficiency.
The change in the landscape has been remarkable, and 2017 will be an exciting, innovative year for Canada’s banks.
As they strive to become more innovative and agile, banks are increasingly embracing and inspired by technological innovations:
New roles - and technology savvy leaders
Partnering for ‘ground floor’ innovation
Banks and FinTechs alike are driven by the need to reduce customer friction and make banking as seamless, easy and straightforward as possible. Despite advances in web and mobile banking, Canadian banks’ customers are frustrated by the fact that they have to visit a branch to conduct certain key banking tasks, such as opening an account or getting a loan.
Canada’s banks are continually striving to improve the efficiency of their back-office operations and reduce their complexity and cost—not an easy task for organizations burdened by decades-old legacy systems. Automation, whether FinTech-driven or not, is seen as a key part of the solution.
Canada’s national payments system, largely untouched for decades, has proven a source of significant customer friction in Canada over the years.
The regulatory burden and compliance costs have continued to rise significantly. Canadian banks, like many of their peers worldwide, have typically addressed compliance challenges by adding more people.
To modernize payments systems, adopt new business models, make room for RegTech and support ongoing innovation, banks have realized that improving the agility and connectivity of their core systems is crucial.
Brian Porter, President & CEO, Scotiabank
BMO’s net income increased 5.1% to $4.6 billion in FY16 compared to $4.4 billion in FY15, driven by positive operating leverage but partially offset by an increase in provision for credit losses.
BNS reported a net income increase of 2.1% to $7.4 billion compared to $7.2 billion in FY15, driven by strong performance across its three business segments. The reported results include a pre-tax $378 million restructuring charge.
CIBC reported net income of $4.3 billion in FY16, up 19.6% from $3.6 billion in FY15, driven by gains on sale of an equity investment, higher non-interest income and strong expense control. The increase in profits was partially offset by higher provisions for credit losses.
NBC reported net income decline of 22.4% to $1.3 billion in FY16 compared to $1.6 billion in FY15, driven by higher non-operating charges and increased provisions for credit losses. The bank reported non-operating charges of $357 million in FY16, including $145 million write-off of equity interest in an associate and $96 million restructuring charge, compared to the total non-operating charges of $63 million in FY15.
RBC reported net income of $10.5 billion in FY16, up 4.3% compared to FY15, driven by acquisition of City National Bank in the United States and strong performance within the Insurance and Investor and Treasury Services segments but partially offset by relatively weak performance within the Capital Markets segment.
TD reported net income of $8.9 billion in FY16, an 11.4% increase over FY15, driven by strong performance in the US Retail segment. Net income adjusted for the impact of one-off items increased 6.1% to $9.3 billion in FY16.
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Caroline Banville, Partner - Consulting at PwC, talked to Lionel Pimpin, Senior Vice-President, Digital Channels, Personal and Commercial Strategies at National Bank of Canada, about National’s innovative and disruptive initiatives, as well as the ones on the horizon for the financial sector.
Our survey found that 100% of Canadian CEOs are confident about the growth prospects of their organizations in the next three years. They rank new strategic alliances and joint ventures, collaboration with entrepreneurs and startups as important enablers of future growth and innovation.
Last year we launched our global report Blurred lines: How FinTech is shaping Financial Services. This year's report digs deeper into how the evolution of trends and innovations are transforming FS organizations.
Since 2007, Digital IQ has examined how far organizations have come and what's needed to unlock value from the next generation of digital technologies.
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