Canadian Finance in 2024: A Year in Review
In the bustling financial landscape of Canada, the year 2024 brought with it a whirlwind of uncertainties and surprises. As the economy teetered on the brink of a possible recession, all eyes were on the banks and borrowers, waiting to see how they would weather the storm.
The Numbers Speak Volumes
With billions of dollars tucked aside by banks in anticipation of a worsening financial picture, concerns about mortgage defaults and borrower stress loomed large. However, as the year drew to a close, it became evident that banks and borrowers had fared better than anticipated.
The adjusted profits of the Big Six banks in the 2024 fiscal year stood at a staggering $58,771,000,000, showcasing a billion-dollar increase from the previous year. Despite fears of subdued loan growth, the Canadian economy settled into a soft landing, allowing banks to still achieve robust profits.
Interest Rates and Mortgage Delinquencies
The Bank of Canada’s interest rate sat at 3.25 per cent at the end of the year, down from the five per cent mark earlier in the year. This decline was mirrored by banks, which lowered their prime rates to 5.45 per cent. Looking ahead to 2025, more rate cuts are expected, with RBC forecasting a further decrease to two per cent by July.
On the mortgage front, the delinquency rate in Canada rose to 0.20 per cent by the end of the third quarter, signaling a slight uptick from previous years. While banks anticipate a further increase in delinquencies due to job losses, they remain confident in the overall stability of their mortgage portfolios.
Blockbuster Deals and Legal Battles
Amidst the financial successes of the year, some of the biggest stories in the industry revolved around blockbuster deals, surprising acquisitions, and even legal scandals. TD Bank Group found itself at the center of a $4.45 billion payment to the U.S. government for anti-money laundering failures, while RBC made headlines with its $13.5 billion acquisition of HSBC Canada.
As the year unfolded, RBC’s market capitalization soared to $246,000,000,000, reflecting a nearly 30 per cent increase. However, not all was smooth sailing, as former CFO Nadine Ahn sued the bank for wrongful dismissal, revealing personal details that captured public attention.
Environmental Concerns and Regulatory Changes
Looking beyond the financial figures, environmental considerations came to the forefront, with Canada’s five biggest banks reducing their fossil fuel funding in 2023. RBC, in particular, committed to tripling its renewable energy funding by 2030, underscoring a shift towards more sustainable practices.
In a bid to protect consumers, the federal government implemented regulations capping the maximum legal interest rate lenders can charge at 35 per cent, effective January 1st. This move, alongside restrictions on payday loans, aims to safeguard borrowers from exorbitant interest rates.
As the year drew to a close, the Canadian financial sector stood resilient, navigating through challenges and embracing opportunities for growth. With 2025 on the horizon, the industry remains poised for further developments and transformations, shaping the future of finance in Canada and beyond.