TD Bank posted $266-million in after-tax restructuring charges through measures including job cuts and real estate reductions.Fred Lum/the Globe and Mail
Canadian banks are slashing jobs to curb mounting expenses and taking higher loan loss provisions as they grapple with the threat of an economic slowdown.
Some of the country’s largest lenders reported mixed fourth-quarter earnings results, with Royal Bank of CanadaRY-T and Canadian Imperial Bank of CommerceCM-T posting higher profit on Thursday that beat analyst expectations, while Toronto-Dominion Bank reported lower net income that missed estimates.
Each bank outlined plans to restructure their operations – measures that include work-force reductions and trimming their real estate footprints – as they look to rein in rising costs ahead of a potential economic slowdown.
TD TD-T posted $266-million in after-tax restructuring charges through measures including job cuts and real estate reductions. The lender expects to book savings of about $400-million pretax in 2024.
The bank said it will reduce its work force by 3 per cent. In the fourth quarter ended Oct. 31, the bank shed about 0.5 per cent of its employee base, or more than 500 jobs. Chief financial officer Kelvin Tran said the restructuring charges also include plans to accelerate the bank’s transition to new technology platforms and reduce its corporate and branch real estate premises.
“We saw the opportunity to undertake a restructuring program to streamline and deliver efficiencies that enabled us to create capacity to invest for future growth,” Mr. Tran said in an interview.
Also Thursday, CIBC recorded $114-million in severance charges, capping off the fiscal year with a 5-per-cent reduction in full-time staff.
RBC said in its third-quarter results that its total number of employees fell 1 per cent from the previous quarter, and that it expected to further decrease its work force by 1 per cent to 2 per cent in the fourth quarter.
On Thursday, the bank said that it posted a severance charge of $157-million as its work force dropped by 2.5 per cent, trimming 2,355 jobs. RBC expects savings of $235-million starting in the next quarter, and that growth in expenses should drop from double-digit increases to low- to mid-single digits in 2024.
RBC earned $4.1-billion, or $2.90 per share, a 6-per-cent jump from the same period last year as a surge in capital markets earnings and lower taxes offset climbing loan-loss provisions. CIBC booked $1.5-billion, or $1.53 per share, a 25-per-cent increase as provisions for bad loans were lower than analysts anticipated and retail banking profits rebounded.
TD however posted a 57-per-cent drop in profit to $2.9-billion, or $1.49 per share, as higher expenses and acquisition and integration costs from its takeover of New York-based investment bank Cowen Inc. sent capital markets profit plunging.
CIBC’s share price climbed 5.1 per cent and RBC’s stock rose 3.2 per cent, while TD slumped 0.7 per cent on Thursday in Toronto.
On Tuesday, Bank of Nova ScotiaBNS-T posted lower profit that missed analyst expectations. Bank of Montreal BMO-T and National Bank of Canada NA-T will release results on Friday.
As delinquencies recover from their lows in 2021, Canada’s largest lenders are increasing their provisions for credit losses – the funds banks set aside to cover loans that may default. RBC set aside $720-million for potentially sour loans, more than analysts expected. TD and CIBC reserved $878-million and $541-million respectively, less than analysts expected.
“The environment this quarter was more stable,” CIBC chief financial officer Hratch Panossian said in an interview. “Things like forward view of debt-service ratios based on the view of interest rates, which started shifting a bit this quarter. And unemployment continues to be generally fairly strong.”
TD investors are waiting for details on the fines or other penalties stemming from probes by regulators and law-enforcement agencies, including the U.S. Department of Justice, related to its anti-money-laundering practices that derailed its acquisition of Tennessee-based First Horizon Corp.
The lender said Thursday that it does not yet know the outcomes of the inquiries and investigations, but it expects monetary and non-monetary penalties. However, it expects that the actions will not have a material impact on the bank’s financial condition. Analyst estimates on the potential penalty range between US$500-million and $1-billion.
“Notwithstanding the progress we have made in our U.S. business, it was disappointing that some shortcomings in our anti-money-laundering control environment were identified during the year, which we are working hard to address, and I am confident that in time we will,” TD chief executive officer Bharat Masrani said in fourth-quarter filings. He added that while the decision to terminate the deal “was a difficult decision – and one not taken lightly – it was the right one for the bank under the circumstances.”
RBC is still in the midst of acquiring the Canadian subsidiary of Britain-based banking giant HSBC Holdings PLC after the foreign company decided to exit the market. Despite escalating scrutiny from political opposition parties and environmental and other stakeholder groups, RBC said it still expects the deal to close in the first quarter of 2024.
“All parties in the approval process understand the benefits to the country of tax revenue and dividend increases, of investment in Canada and incremental investment in Canada, of the benefits to employees and to clients – everybody understands that,” RBC chief executive officer Dave McKay said during a conference call with analysts. “Everybody understands that HSBC has made a choice to leave, and it would look horrible on Canada if you didn’t allow the free flow of capital.”
Human Resources Officers must be very busy these days what with the general turnover of employees in our retail and business sectors. It is hard enough to find skilled people let alone potential employees willing to be trained. Then after the training, a few weeks go by then they come to you and ask for a raise. You refuse as there simply is no excess money in the budget and away they fly to wherever they come from, trained but not willing to put in the time to achieve that wanted raise.
I have had potentials come in and we give them a test to see if they do indeed know how to weld, polish or work with wood. 2-10 we hire, and one of those is gone in a week or two. Ask that they want overtime, and their laughter leaving the building is loud and unsettling. Housing starts are doing well but way behind because those trades needed to finish a project simply don’t come to the site, with delay after delay. Some people’s attitudes are just too funny. A recent graduate from a Ivy League university came in for an interview. The position was mid-management potential, but when we told them a three month period was needed and then they would make the big bucks they disappeared as fast as they arrived.
Government agencies are really no help, sending us people unsuited or unwilling to carry out the jobs we offer. Handing money over to staffing firms whose referrals are weak and ineffectual. Perhaps with the Fall and Winter upon us, these folks will have to find work and stop playing on the golf course or cottaging away. Tried to hire new arrivals in Canada but it is truly difficult to find someone who has a real identity card and is approved to live and work here. Who do we hire? Several years ago my father’s firm was rocking and rolling with all sorts of work. It was a summer day when the immigration officers arrived and 30+ employees hit the bricks almost immediately. The investigation that followed had threats of fines thrown at us by the officials. Good thing we kept excellent records, photos and digital copies. We had to prove the illegal documents given to us were as good as the real McCoy.
Restauranteurs, builders, manufacturers, finishers, trades-based firms, and warehousing are all suspect in hiring illegals, yet that becomes secondary as Toronto increases its minimum wage again bringing our payroll up another $120,000. Survival in Canada’s financial and business sectors is questionable for many. Good luck Chuck!. at least your carbon tax refund check should be arriving soon.
NORMAN WELLS, N.W.T. – Imperial Oil says it will temporarily reduce its fuel prices in a Northwest Territories community that has seen costs skyrocket due to low water on the Mackenzie River forcing the cancellation of the summer barge resupply season.
Imperial says in a Facebook post it will cut the air transportation portion that’s included in its wholesale price in Norman Wells for diesel fuel, or heating oil, from $3.38 per litre to $1.69 per litre, starting Tuesday.
The air transportation increase, it further states, will be implemented over a longer period.
It says Imperial is closely monitoring how much fuel needs to be airlifted to the Norman Wells area to prevent runouts until the winter road season begins and supplies can be replenished.
Gasoline and heating fuel prices approached $5 a litre at the start of this month.
Norman Wells’ town council declared a local emergency on humanitarian grounds last week as some of its 700 residents said they were facing monthly fuel bills coming to more than $5,000.
“The wholesale price increase that Imperial has applied is strictly to cover the air transportation costs. There is no Imperial profit margin included on the wholesale price. Imperial does not set prices at the retail level,” Imperial’s statement on Monday said.
The statement further said Imperial is working closely with the Northwest Territories government on ways to help residents in the near term.
“Imperial Oil’s decision to lower the price of home heating fuel offers immediate relief to residents facing financial pressures. This step reflects a swift response by Imperial Oil to discussions with the GNWT and will help ease short-term financial burdens on residents,” Caroline Wawzonek, Deputy Premier and Minister of Finance and Infrastructure, said in a news release Monday.
Wawzonek also noted the Territories government has supported the community with implementation of a fund supporting businesses and communities impacted by barge cancellations. She said there have also been increases to the Senior Home Heating Subsidy in Norman Wells, and continued support for heating costs for eligible Income Assistance recipients.
Additionally, she said the government has donated $150,000 to the Norman Wells food bank.
In its declaration of a state of emergency, the town said the mayor and council recognized the recent hike in fuel prices has strained household budgets, raised transportation costs, and affected local businesses.
It added that for the next three months, water and sewer service fees will be waived for all residents and businesses.
This report by The Canadian Press was first published Oct. 21, 2024.
TORONTO – A new report says many Canadian business leaders are worried about economic uncertainties related to the looming U.S. election.
The survey by KPMG in Canada of 735 small- and medium-sized businesses says 87 per cent fear the Canadian economy could become “collateral damage” from American protectionist policies that lead to less favourable trade deals and increased tariffs
It says that due to those concerns, 85 per cent of business leaders in Canada polled are reviewing their business strategies to prepare for a change in leadership.
The concerns are primarily being felt by larger Canadian companies and sectors that are highly integrated with the U.S. economy, such as manufacturing, automotive, transportation and warehousing, energy and natural resources, as well as technology, media and telecommunications.
Shaira Nanji, a KPMG Law partner in its tax practice, says the prospect of further changes to economic and trade policies in the U.S. means some Canadian firms will need to look for ways to mitigate added costs and take advantage of potential trade relief provisions to remain competitive.
Both presidential candidates have campaigned on protectionist policies that could cause uncertainty for Canadian trade, and whoever takes the White House will be in charge during the review of the United States-Mexico-Canada Agreement in 2026.
This report by The Canadian Press was first published Oct. 22, 2024.
