Royal Bank’s mortgage juggernaut shows little sign of slowing
The bank reported 6.4 per cent growth in Canadian residential mortgages in the fiscal first quarter, with average balances climbing to $238.5 billion. That’s down from the 6.6 per cent growth rate in the fourth quarter, though it’s still the second-best pace in seven quarters.
Canadian banks have been anticipating a slowdown in mortgage lending amid elevated housing prices, overextended borrowers, and tougher mortgage eligibility rules that kicked in this year.
The country’s banking regulator changed the rules for borrowers in the uninsured mortgage market, making it more difficult for those with less than a 20 per cent down payment to qualify for loans as of Jan. 1. The measures, known as B-20 guidelines, require banks to test a borrower’s ability to pay at the greater of the Bank of Canada’s five-year benchmark rate or 2 percentage points higher than the offered mortgage rate.
Mortgage lending makes up a significant part of the firm’s Canadian banking division, whose earnings rose 11 per cent to $1.48 billion from a year earlier when excluding gains from selling a payments business. Royal Bank’s balances represent about 15 per cent of Canada’s $1.52 trillion mortgage market.
Net income in the period ended Jan. 31 fell 0.5 per cent to $3.01 billion, or $2.01 a share, from $3.03 billion, or $1.97, a year earlier, Toronto-based Royal Bank said Friday in a statement. Adjusted profit, which excludes some items, was $2.05 a share, beating the $1.99 average estimate of 13 analysts surveyed by Bloomberg. Royal Bank raised its quarterly dividend 3.3 per cent to 94 cents.
Canadian Imperial Bank of Commerce on Thursday posted profit that exceeded analysts’ estimates on gains from its U.S. businesses and better-than-expected provisions for credit losses. Bank of Nova Scotia and Bank of Montreal report results on Feb. 27, followed by Toronto-Dominion Bank on March 1.
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