TORONTO, March 13 /CNW/ - 2007 was a pivotal year for the banks.
According to Canadian Banks 2008, PricewaterhouseCoopers' (PwC) annual review
of the banking industry, Canada's big six banks combined 2007 net income was
CDN$19.5 billion - a small increase in year-over-year growth of just 2.2%,
compared to a record-breaking 50% increase in the previous year.
"While many of the banks were concerned about a possible downturn in the
credit cycle, few foresaw the extent of the challenges and predicted it would
stem from a liquidity crisis," says Diana Chant, Partner and Leader of the PwC
Financial Services Practice in Canada. "Challenging 2008 first quarter results
are a clear indication that uncertain market conditions will continue to test
In 2007, each bank readied itself for the tightening credit market by
making changes and pursuing growth through acquisitions outside our borders.
The largest of these deals was TD's announced US$8.5 billion acquisition of
Commerce Bank. The size of these acquisitions, however, paled in comparison to
those made by banks at the global level. In fact, Canada's largest bank, RBC,
is now a third of the size of the third largest global bank.
"The growing size gap between Canadian and global banks is making it
increasingly difficult for Canadian banks to compete," says Chant. "Large
global banks have far more resources for product development, systems
development and acquisitions than their Canadian counterparts. It's critical
that Canadian banks become more focused and invest in a few, carefully chosen
Canadian Banks 2008 also looked at some of the challenges and
opportunities the big six banks will face in the coming years, including:
- Seizing environmental product and service opportunities
- Facing growing competition from foreign banks
- Preparing for the conversion to International Financial Reporting
- Protecting and winning market share through a focus on customers and
- Streamlining the regulatory burden
"All of Canada's banks are pursuing different strategies to improve their
customer experience and their talent and risk management," says Chant. "Over
the next year, banks will be challenged by slower growth and continued
instability in the credit markets. It will be very important for each bank to
understand the impact of these changing conditions on their own operations,
respond quickly and make effective decisions."
Canadian Banks 2008, PwC's annual survey of the banking industry is
available online at: www.pwc.com/ca/canadianbanks.
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