Category: Canada

Canada, Economy

Canadian banks will require more capital to remain within targets

Colin Henderson

The IMF have released their working papers following their analysis of Canadian Banks.  Notwithstanding the positive comments about Canadian banks financial position entering the crisis, there remains potential for a requirement for increased capital as negatives in Canada could decrease bank capital by 2.5% – 3.5% over next year or two. The IMF employed the American stress test approach to Canadian banks in this exercise. Here is the current position: There are two ratios being watched – Tier 1 and Total Capital.  In a nutshell and worst case scenario, IMF are saying if 2.5% or 3.5% is taken off either … Continue reading Canadian banks will require more capital to remain within targets

Canada2 Comments

What makes Canadian Banks different in this crisis? | OECD

Colin Henderson

This 21 page document reviews the circumstances prior to the crisis of Canadian Banks and other OECD Banks.  The relative abundance of retail deposits (compared to more volatile wholesale deposits)  seems to have been key for the resilience of Canadian banks, supplemented by a risk averse financial culture. The differences from the summary were as follows – Canadian Banks were: better capitalised Capital ratios before the crisis were a key determinant of bank performance during the turmoil; and Canadian banks had ample capital more liquid Compared to OECD peers, Canadian banks had slightly above-average balance sheet liquidity enjoyed relatively more … Continue reading What makes Canadian Banks different in this crisis? | OECD

Canada

Speculation mounts about Virgin next move for banking in Canada

Colin Henderson

There appears to be little more than speculation, and floating of ideas here, but nonetheless Virgin have just announced intention to launch a direct bank in UK, and Branson has noted his broad intention to get more involved in financials services. Something to keep our eyes on.  A move such as this is good for financial services, and good for the broader industry including system vendors, such as my friends at SIT, because any new set up will need the flexibility of a web based approach coupled with solid banking and investment systems. Virgin’s next chapter: Is now the time … Continue reading Speculation mounts about Virgin next move for banking in Canada

Canada6 Comments

The Canadian bank model secret? | risk aversion

Colin Henderson

The general theme that the ‘Canadian Bank model’ is superior has constantly intrigued me, having been personally involved there. Size and Diversification: They are smaller and less diversified, so some risk mitigation appears there. This is probably the biggest reason. Number: There are only five of them, of any consequence, so a couple of regulators can do a lot of supervision there. Loan restriction: there is a restriction on loan participation relative to capital. Purdy Crawford/ Pan Canadian Investments: The Canadian government did presciently freeze $35 billion in derivatives back in 2007. But no … in aggregate there is no … Continue reading The Canadian bank model secret? | risk aversion

Canada, Economy

Bank of Canada Monetary Policy Report Apr 2009 sees economy worse that projected, but consumer credit is growing

Colin Henderson

Bank of Canada has released its quarterly Monetary Policy report.  It is useful here in the context of Canada and the impact on consumers, particularly as Canada has been painted as being in better shape than other countries.  Consumer confidence represented by purchasing is down, but consumer credit is still growing at a slower pace.  They question will be to what extent credit defaults arise over upcoming months. Speech and Report: Global industrial production has fallen sharply … … and Canadian GDP has fallen sharply too, and worse than predicted earlier .. … while the Canadian hit on wealth has … Continue reading Bank of Canada Monetary Policy Report Apr 2009 sees economy worse that projected, but consumer credit is growing

Business Models, Canada, Economy1 Comment

A new future based on a different revenue model is needed for banks

Colin Henderson

Something has been bothering me for some time, and now the planets are beginning to align.  One of the promises of Internet is a future which is more efficient.  This literally means less money changing hands to get things done.  hohoto.ca can occur with zero overt marketing costs, based on personal contribution of willing advocates.  Costs do not go to zero – it is not that simple – but costs are less than before by a considerable margin. The Spider and the Starfish touched on this point in 2006. “as industries become decentralised, overall profits decrease” My summary at that … Continue reading A new future based on a different revenue model is needed for banks

Canada, Social Lending, US

The promise of social lending – one that stretches the known financial framework

Colin Henderson

This has been a weird week for social lending, but an email conversation with the always clear thinking Ron brought it into perspective.  Ron asked if the new model is in fact simpler – brilliant question. New Approach Puts Secondary Market to Work in P-to-P | American Banker [note:  access to full story requires registration] Edward Woods, a senior analyst for Celent, a Boston market research unit of Marsh & McLennan Cos., said the model Lending Club and Prosper have chosen is the one most likely to thrive as this market matures. “You’ll see fewer experiments” along the lines of … Continue reading The promise of social lending – one that stretches the known financial framework

Canada, UK, US1 Comment

Enormous shifts have occurred in banks’ market capitalisation

Colin Henderson

The degree of shift that has occurred and is occurring as we speak with respect to bank valuations is simply staggerring.  What got me going on this was when I noticed that the combined market capitalisation (stock exchange value of a company) of Lloyds Bank, Barclays, and HBOS was less than several of the Canadian banks.  So with the valuable assistance of Google Finance here are some statistics, with some notes following. the banks picked here have had their value cut in half the UK banks are in terrible shape with low market cap, and reflecting low P/E the Canadian … Continue reading Enormous shifts have occurred in banks’ market capitalisation

Canada, sub prime, UK, US

Canada banking sector is avoiding the troubles in US and UK

Colin Henderson

The press is all doom and gloom at the moment.  Not without reason, but the causes and implications are getting blurred.  So I did a simple analysis comparing three stock markets, their fall since mid 2007, and the relative importance of the banking sector in that fall.  The results suggest that it does depend where you live.  There is an all out banking crisis in the US and UK, based on market sentiment.     Somehow Canadian banks are not regarded with such fear as the others.  This no doubt partly due to the early work of Purdy Crawford and … Continue reading Canada banking sector is avoiding the troubles in US and UK

Canada

Credit crunch fallout will cast a long shadow | RBC

Colin Henderson

IN the clearest indication yet of the depth of the credit crunch and how it will impact Canadians, Nixon of RBC speaks about the impacts on consumers.  Credit crunch fallout will cast a long shadow The consensus of the big brains? The credit market is stabilizing, finally. But the after-effects of the Great Debt Squeeze will linger. (And by the way, they’ll probably hit your wallet, if they haven’t already.) No one was more pointed about this than Mr. Nixon, who called it the most severe financial crisis since the Great Depression and used the word “bubble” to describe the … Continue reading Credit crunch fallout will cast a long shadow | RBC