Bank CEOS talk up economy’s fundamentals

‘Markets have seen things are pretty solid’

The leaders of some of Canada’s biggest banks said Tuesday that they were still seeing steady economic fundamentals amid the recent rough patches in the markets.

“I think the markets have taken a pause now and have come back and seen that things are pretty solid,” Royal Bank of Canada president and chief executive officer Dave Mckay said at his company’s Canadian bank CEO conference in Toronto.

“So we’re seeing strong fundamentals. And I think that bodes well for growth this year.”

Other than the market volatility, which Mckay said impacts RBC’S business, the CEO said the lender was “feeling pretty good about things.”

The sentiment was shared by TD Bank CEO Bharat Masrani, who said “the fundamentals continue to be very supportive,” albeit with volatility on the capital markets side that could create some uncertainty for the future.

“But overall, fundamentals matter to TD,” Masrani told the conference. “That’s a big part of our business. I’m still feeling good ... for this year, and hopefully it will sustain into 2020 as well.”

Bank of Montreal CEO Darryl White said Tuesday that the fallout from the market gyrations did not seem to be affecting their clients on an economic level.

“The underlying performance of those companies that we deal with is very good,” White told the conference. “Credit quality is not being affected to any extent as we look at it today, and spending patterns continue and unemployment continues to decline.”

Economic fundamentals and market volatility are also on the minds of central bankers, whose decisions on whether to move interest-rate targets can affect the major corporate banks as well.

While the Bank of Canada and U.S. Federal Reserve have been raising rates — and have suggested that they need to climb even higher — the headwinds that had arisen in the markets and over economic and trade concerns have been enough to cloud forecasts for future hikes.

Credit rating agency DBRS said in December that it expected “continued robust earnings power” for the big Canadian banks. Additional rate hikes could benefit the banks even further, as they make money on the spread between what they pay out in deposits and what they charge for loans.

“The global economic outlook remains favourable and the large Canadian banks could benefit from a rising interest rate environment,” DBRS said on Dec. 19.

But Brian Porter, president and CEO of Bank of Nova Scotia, said Tuesday that his company would be “in the camp that … you’re not going to see the number of rate increases, certainly, that people would have been forecasting four, five, six months ago.”

Porter also told the conference that Scotiabank is forecasting an economic slowdown in Canada and the U.S., not a “downturn.” However, he added that they are running the bank to be “downturn-ready.”

“We go through these bouts of volatility,” Porter said. “This one was ... probably as severe as I’ve seen in my career, but things will settle down and we’ll get back to business and get back to normal.”

Canadian Imperial Bank of Commerce president and CEO Victor Dodig said at Tuesday’s conference that he was “a little more cautious” after watching the market’s recent reactions.

“I’m still optimistic about the time that we live in and doing business in this environment,” he said, before adding: “I think it’s going to be more challenging.”