Banks ready for sluggish economy
The Canadian Press - Nov 30, 2023 - Business Buzz

Photo: The Canadian Press

TORONTO — Several Canadian banks on Thursday reported fourth-quarter results that showed rising funds set aside for bad loans and a heavy focus on expense management as they prepared for the expected slower economy ahead.

TD Bank boosted provisions for potential loan losses to $878 million, RBC is up to $720 million, and CIBC amounted to $541 million, while on Tuesday Scotiabank said it had set aside $1.3 billion.

The rising provisions come as Statistics Canada reported Thursday that the economy shrank in the third quarter by 1.1% on an annualized basis as high interest rates pressure consumers and businesses.

With the slowdown expected to continue, banks have been working to trim expenses to better manage through the trough, including reducing their workforce.

TD announced on Thursday it was cutting about 3% of staff, or about 3,100 positions, and would take a $363-million restructuring charge this quarter and a similar one next quarter as it works through the reductions.

“This is a part of a broader restructuring program to streamline and deliver efficiencies for the bank and then help create capacity to invest in future growth,” chief financial officer Kelvin Tran said.

CIBC said it had steadily cut back throughout the year with staffing down about 5%, or 2,300 jobs, from last year, and it took a $114 million charge in the fourth quarter as part of that.

RBC announced last quarter it was cutting upwards of 3% of staff, with the latest results showing personnel down 3,000 from the end of the second quarter.

At the same time, all three banks announced dividend increases on Thursday.

The rise in dividends came as the banks underlined their stable finances that they expect to weather the turbulence ahead.

“We’ve architected CIBC to deal with the economic environment that might come in 2024,” CIBC chief executive Victor Dodig said on an earnings call.

“If things go slow, we’ll manage accordingly. If things turn better, and there’s a very good chance that we have this ‘soft landing,’ we will capitalize on that as well.”

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