Canada – s big banks cut prime rate after BoC move – The Globe and


#prime interest rate today

#

Canada s big banks cut prime rate after BoC move Add to.

Canada’s big banks followed the Bank of Canada’s interest rate cut, lowering their prime lending rates in a series of moves that nonetheless reinforce the reluctance of lenders to follow the central bank in lockstep.

Toronto-Dominion Bank initially decreased its prime rate – the benchmark for creditworthy borrowers – to 2.75 per cent, down 0.10 percentage points. Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce responded on Wednesday evening, reducing theirs by 0.15 points to 2.70 per cent from 2.85 per cent. That’s a shallower reduction than the central bank’s 0.25-point cut. TD then matched the lower prime rates with an additional cut.

ECONOMY

The Canadian dollar took a nosedive after The Bank of Canada cut its key overnight lending rate by 25 basis points to 0.50 percent saying Canada’s weakening economy is in ‘significant and complex adjustment.’ BNN Video

Economy
ECONOMY

This marks the second time this year that Bay Street has taken a more cautious approach to their lending rates after the central bank has slashed its benchmark in response to disappointing economic activity.

Overall, banks have lowered their prime rates by a total of 0.3 percentage points this year, or nearly half the Bank of Canada’s total reduction of 0.50 points over the same period.

Bank of Canada Governor Stephen Poloz appeared unconcerned by the banks’ response, noting that lending rates can be affected by many factors beyond official monetary policy.

“That’s how financial markets work,” Mr. Poloz said at a press conference. “All we’re trying to do is have an influence on [the lending rate], as opposed to determine it.”

After the Bank of Canada cut its key rate in January, also by a quarter point, the big banks were slow in responding to the surprise move.

When they did react, they took a public drubbing over their refusal to respond with an equal reduction in their prime rates, decreasing them by just 0.15 points.

However, some observers have pointed out that the Bank of Canada may not mind the muted response from the banks.

House prices have soared as borrowing costs have fallen, raising concerns that prices may be overvalued by as much as 30 per cent, according to Bank of Canada estimates. As well, Canadian indebtedness has risen to new heights, making consumers vulnerable to rising unemployment levels or an eventual ramp-up in borrowing costs.

For the banks themselves, the response to the Bank of Canada comes as they attempt to shore up profits driven by their lending activities.

Since the banks make money by lending at higher rates than their own borrowing costs, substantially lower prime rates can compress the spread, or net interest margins.

“We are in such an unusually low-interest-rate environment that the traditional rules of one-for-one [reductions in the prime rate and the Bank of Canada’s key interest rate] don’t work,” Peter Routledge, an analyst at National Bank Financial, said in an interview.

He pointed out that the net interest margin for the Canadian personal and commercial banking operations of the Big Six banks have declined to a weighted average of just 2.48 per cent from 2.73 per cent in 2010. Less than a decade ago, the margin was a far more robust 3 per cent.

Although Canadian banks have increased their overall profits over this period, their share prices have recently been struggling to keep up with the broader market, reflecting investor concerns that earnings growth is being challenged.

“We anticipate that the market’s outlook for growth will moderate further in 2016, encapsulating an even greater slowdown in loan growth and incremental margin pressures,” John Aiken, an analyst at Barclays, said in a note.

Mr. Routledge thinks the banks may also be maintaining higher prime rates, relative to the Bank of Canada’s key rate, out of concerns about credit risk.

“If the economy is slowing so much that the Bank of Canada has cut its policy rate in half” – to 0.5 per cent from 1 per cent in January – “maybe households in particular are not as creditworthy as consensus believes,” he said.

“If that’s the case, you want to put in a little more spread for taking credit risk.”

Restrictions

Thomson Reuters 2012.

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.

Selected data supplied by Thomson Reuters. Thomson Reuters Limited. Click for Restrictions .

Copyright 2016 The Globe and Mail Inc. All Rights Reserved.

444 Front St. W. Toronto. ON Canada M5V 2S9
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Canada – s big banks cut prime rate after BoC move – The Globe and


#prime interest rate today

#

Canada s big banks cut prime rate after BoC move Add to.

Canada’s big banks followed the Bank of Canada’s interest rate cut, lowering their prime lending rates in a series of moves that nonetheless reinforce the reluctance of lenders to follow the central bank in lockstep.

Toronto-Dominion Bank initially decreased its prime rate – the benchmark for creditworthy borrowers – to 2.75 per cent, down 0.10 percentage points. Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce responded on Wednesday evening, reducing theirs by 0.15 points to 2.70 per cent from 2.85 per cent. That’s a shallower reduction than the central bank’s 0.25-point cut. TD then matched the lower prime rates with an additional cut.

ECONOMY

The Canadian dollar took a nosedive after The Bank of Canada cut its key overnight lending rate by 25 basis points to 0.50 percent saying Canada’s weakening economy is in ‘significant and complex adjustment.’ BNN Video

Economy
ECONOMY

This marks the second time this year that Bay Street has taken a more cautious approach to their lending rates after the central bank has slashed its benchmark in response to disappointing economic activity.

Overall, banks have lowered their prime rates by a total of 0.3 percentage points this year, or nearly half the Bank of Canada’s total reduction of 0.50 points over the same period.

Bank of Canada Governor Stephen Poloz appeared unconcerned by the banks’ response, noting that lending rates can be affected by many factors beyond official monetary policy.

“That’s how financial markets work,” Mr. Poloz said at a press conference. “All we’re trying to do is have an influence on [the lending rate], as opposed to determine it.”

After the Bank of Canada cut its key rate in January, also by a quarter point, the big banks were slow in responding to the surprise move.

When they did react, they took a public drubbing over their refusal to respond with an equal reduction in their prime rates, decreasing them by just 0.15 points.

However, some observers have pointed out that the Bank of Canada may not mind the muted response from the banks.

House prices have soared as borrowing costs have fallen, raising concerns that prices may be overvalued by as much as 30 per cent, according to Bank of Canada estimates. As well, Canadian indebtedness has risen to new heights, making consumers vulnerable to rising unemployment levels or an eventual ramp-up in borrowing costs.

For the banks themselves, the response to the Bank of Canada comes as they attempt to shore up profits driven by their lending activities.

Since the banks make money by lending at higher rates than their own borrowing costs, substantially lower prime rates can compress the spread, or net interest margins.

“We are in such an unusually low-interest-rate environment that the traditional rules of one-for-one [reductions in the prime rate and the Bank of Canada’s key interest rate] don’t work,” Peter Routledge, an analyst at National Bank Financial, said in an interview.

He pointed out that the net interest margin for the Canadian personal and commercial banking operations of the Big Six banks have declined to a weighted average of just 2.48 per cent from 2.73 per cent in 2010. Less than a decade ago, the margin was a far more robust 3 per cent.

Although Canadian banks have increased their overall profits over this period, their share prices have recently been struggling to keep up with the broader market, reflecting investor concerns that earnings growth is being challenged.

“We anticipate that the market’s outlook for growth will moderate further in 2016, encapsulating an even greater slowdown in loan growth and incremental margin pressures,” John Aiken, an analyst at Barclays, said in a note.

Mr. Routledge thinks the banks may also be maintaining higher prime rates, relative to the Bank of Canada’s key rate, out of concerns about credit risk.

“If the economy is slowing so much that the Bank of Canada has cut its policy rate in half” – to 0.5 per cent from 1 per cent in January – “maybe households in particular are not as creditworthy as consensus believes,” he said.

“If that’s the case, you want to put in a little more spread for taking credit risk.”

Restrictions

Thomson Reuters 2012.

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.

Selected data supplied by Thomson Reuters. Thomson Reuters Limited. Click for Restrictions .

Copyright 2016 The Globe and Mail Inc. All Rights Reserved.

444 Front St. W. Toronto. ON Canada M5V 2S9
Phillip Crawley, Publisher

Add to Watchlist

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Canada – s big banks cut prime rate after BoC move – The Globe and


#prime interest rate today

#

Canada s big banks cut prime rate after BoC move Add to.

Canada’s big banks followed the Bank of Canada’s interest rate cut, lowering their prime lending rates in a series of moves that nonetheless reinforce the reluctance of lenders to follow the central bank in lockstep.

Toronto-Dominion Bank initially decreased its prime rate – the benchmark for creditworthy borrowers – to 2.75 per cent, down 0.10 percentage points. Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce responded on Wednesday evening, reducing theirs by 0.15 points to 2.70 per cent from 2.85 per cent. That’s a shallower reduction than the central bank’s 0.25-point cut. TD then matched the lower prime rates with an additional cut.

ECONOMY

The Canadian dollar took a nosedive after The Bank of Canada cut its key overnight lending rate by 25 basis points to 0.50 percent saying Canada’s weakening economy is in ‘significant and complex adjustment.’ BNN Video

Economy
ECONOMY

This marks the second time this year that Bay Street has taken a more cautious approach to their lending rates after the central bank has slashed its benchmark in response to disappointing economic activity.

Overall, banks have lowered their prime rates by a total of 0.3 percentage points this year, or nearly half the Bank of Canada’s total reduction of 0.50 points over the same period.

Bank of Canada Governor Stephen Poloz appeared unconcerned by the banks’ response, noting that lending rates can be affected by many factors beyond official monetary policy.

“That’s how financial markets work,” Mr. Poloz said at a press conference. “All we’re trying to do is have an influence on [the lending rate], as opposed to determine it.”

After the Bank of Canada cut its key rate in January, also by a quarter point, the big banks were slow in responding to the surprise move.

When they did react, they took a public drubbing over their refusal to respond with an equal reduction in their prime rates, decreasing them by just 0.15 points.

However, some observers have pointed out that the Bank of Canada may not mind the muted response from the banks.

House prices have soared as borrowing costs have fallen, raising concerns that prices may be overvalued by as much as 30 per cent, according to Bank of Canada estimates. As well, Canadian indebtedness has risen to new heights, making consumers vulnerable to rising unemployment levels or an eventual ramp-up in borrowing costs.

For the banks themselves, the response to the Bank of Canada comes as they attempt to shore up profits driven by their lending activities.

Since the banks make money by lending at higher rates than their own borrowing costs, substantially lower prime rates can compress the spread, or net interest margins.

“We are in such an unusually low-interest-rate environment that the traditional rules of one-for-one [reductions in the prime rate and the Bank of Canada’s key interest rate] don’t work,” Peter Routledge, an analyst at National Bank Financial, said in an interview.

He pointed out that the net interest margin for the Canadian personal and commercial banking operations of the Big Six banks have declined to a weighted average of just 2.48 per cent from 2.73 per cent in 2010. Less than a decade ago, the margin was a far more robust 3 per cent.

Although Canadian banks have increased their overall profits over this period, their share prices have recently been struggling to keep up with the broader market, reflecting investor concerns that earnings growth is being challenged.

“We anticipate that the market’s outlook for growth will moderate further in 2016, encapsulating an even greater slowdown in loan growth and incremental margin pressures,” John Aiken, an analyst at Barclays, said in a note.

Mr. Routledge thinks the banks may also be maintaining higher prime rates, relative to the Bank of Canada’s key rate, out of concerns about credit risk.

“If the economy is slowing so much that the Bank of Canada has cut its policy rate in half” – to 0.5 per cent from 1 per cent in January – “maybe households in particular are not as creditworthy as consensus believes,” he said.

“If that’s the case, you want to put in a little more spread for taking credit risk.”

Restrictions

Thomson Reuters 2012.

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.

Selected data supplied by Thomson Reuters. Thomson Reuters Limited. Click for Restrictions .

Copyright 2016 The Globe and Mail Inc. All Rights Reserved.

444 Front St. W. Toronto. ON Canada M5V 2S9
Phillip Crawley, Publisher

Add to Watchlist

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Canada – s big banks cut prime rate after BoC move – The Globe and


#prime interest rate today

#

Canada s big banks cut prime rate after BoC move Add to.

Canada’s big banks followed the Bank of Canada’s interest rate cut, lowering their prime lending rates in a series of moves that nonetheless reinforce the reluctance of lenders to follow the central bank in lockstep.

Toronto-Dominion Bank initially decreased its prime rate – the benchmark for creditworthy borrowers – to 2.75 per cent, down 0.10 percentage points. Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce responded on Wednesday evening, reducing theirs by 0.15 points to 2.70 per cent from 2.85 per cent. That’s a shallower reduction than the central bank’s 0.25-point cut. TD then matched the lower prime rates with an additional cut.

ECONOMY

The Canadian dollar took a nosedive after The Bank of Canada cut its key overnight lending rate by 25 basis points to 0.50 percent saying Canada’s weakening economy is in ‘significant and complex adjustment.’ BNN Video

Economy
ECONOMY

This marks the second time this year that Bay Street has taken a more cautious approach to their lending rates after the central bank has slashed its benchmark in response to disappointing economic activity.

Overall, banks have lowered their prime rates by a total of 0.3 percentage points this year, or nearly half the Bank of Canada’s total reduction of 0.50 points over the same period.

Bank of Canada Governor Stephen Poloz appeared unconcerned by the banks’ response, noting that lending rates can be affected by many factors beyond official monetary policy.

“That’s how financial markets work,” Mr. Poloz said at a press conference. “All we’re trying to do is have an influence on [the lending rate], as opposed to determine it.”

After the Bank of Canada cut its key rate in January, also by a quarter point, the big banks were slow in responding to the surprise move.

When they did react, they took a public drubbing over their refusal to respond with an equal reduction in their prime rates, decreasing them by just 0.15 points.

However, some observers have pointed out that the Bank of Canada may not mind the muted response from the banks.

House prices have soared as borrowing costs have fallen, raising concerns that prices may be overvalued by as much as 30 per cent, according to Bank of Canada estimates. As well, Canadian indebtedness has risen to new heights, making consumers vulnerable to rising unemployment levels or an eventual ramp-up in borrowing costs.

For the banks themselves, the response to the Bank of Canada comes as they attempt to shore up profits driven by their lending activities.

Since the banks make money by lending at higher rates than their own borrowing costs, substantially lower prime rates can compress the spread, or net interest margins.

“We are in such an unusually low-interest-rate environment that the traditional rules of one-for-one [reductions in the prime rate and the Bank of Canada’s key interest rate] don’t work,” Peter Routledge, an analyst at National Bank Financial, said in an interview.

He pointed out that the net interest margin for the Canadian personal and commercial banking operations of the Big Six banks have declined to a weighted average of just 2.48 per cent from 2.73 per cent in 2010. Less than a decade ago, the margin was a far more robust 3 per cent.

Although Canadian banks have increased their overall profits over this period, their share prices have recently been struggling to keep up with the broader market, reflecting investor concerns that earnings growth is being challenged.

“We anticipate that the market’s outlook for growth will moderate further in 2016, encapsulating an even greater slowdown in loan growth and incremental margin pressures,” John Aiken, an analyst at Barclays, said in a note.

Mr. Routledge thinks the banks may also be maintaining higher prime rates, relative to the Bank of Canada’s key rate, out of concerns about credit risk.

“If the economy is slowing so much that the Bank of Canada has cut its policy rate in half” – to 0.5 per cent from 1 per cent in January – “maybe households in particular are not as creditworthy as consensus believes,” he said.

“If that’s the case, you want to put in a little more spread for taking credit risk.”

Restrictions

Thomson Reuters 2012.

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.

Selected data supplied by Thomson Reuters. Thomson Reuters Limited. Click for Restrictions .

Copyright 2016 The Globe and Mail Inc. All Rights Reserved.

444 Front St. W. Toronto. ON Canada M5V 2S9
Phillip Crawley, Publisher

Add to Watchlist

We’ve run into a glitch. Please try again later.

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Customize your reading font


Canada – s big banks cut prime rate after BoC move – The Globe and


#prime interest rate today

#

Canada s big banks cut prime rate after BoC move Add to.

Canada’s big banks followed the Bank of Canada’s interest rate cut, lowering their prime lending rates in a series of moves that nonetheless reinforce the reluctance of lenders to follow the central bank in lockstep.

Toronto-Dominion Bank initially decreased its prime rate – the benchmark for creditworthy borrowers – to 2.75 per cent, down 0.10 percentage points. Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce responded on Wednesday evening, reducing theirs by 0.15 points to 2.70 per cent from 2.85 per cent. That’s a shallower reduction than the central bank’s 0.25-point cut. TD then matched the lower prime rates with an additional cut.

ECONOMY

The Canadian dollar took a nosedive after The Bank of Canada cut its key overnight lending rate by 25 basis points to 0.50 percent saying Canada’s weakening economy is in ‘significant and complex adjustment.’ BNN Video

Economy
ECONOMY

This marks the second time this year that Bay Street has taken a more cautious approach to their lending rates after the central bank has slashed its benchmark in response to disappointing economic activity.

Overall, banks have lowered their prime rates by a total of 0.3 percentage points this year, or nearly half the Bank of Canada’s total reduction of 0.50 points over the same period.

Bank of Canada Governor Stephen Poloz appeared unconcerned by the banks’ response, noting that lending rates can be affected by many factors beyond official monetary policy.

“That’s how financial markets work,” Mr. Poloz said at a press conference. “All we’re trying to do is have an influence on [the lending rate], as opposed to determine it.”

After the Bank of Canada cut its key rate in January, also by a quarter point, the big banks were slow in responding to the surprise move.

When they did react, they took a public drubbing over their refusal to respond with an equal reduction in their prime rates, decreasing them by just 0.15 points.

However, some observers have pointed out that the Bank of Canada may not mind the muted response from the banks.

House prices have soared as borrowing costs have fallen, raising concerns that prices may be overvalued by as much as 30 per cent, according to Bank of Canada estimates. As well, Canadian indebtedness has risen to new heights, making consumers vulnerable to rising unemployment levels or an eventual ramp-up in borrowing costs.

For the banks themselves, the response to the Bank of Canada comes as they attempt to shore up profits driven by their lending activities.

Since the banks make money by lending at higher rates than their own borrowing costs, substantially lower prime rates can compress the spread, or net interest margins.

“We are in such an unusually low-interest-rate environment that the traditional rules of one-for-one [reductions in the prime rate and the Bank of Canada’s key interest rate] don’t work,” Peter Routledge, an analyst at National Bank Financial, said in an interview.

He pointed out that the net interest margin for the Canadian personal and commercial banking operations of the Big Six banks have declined to a weighted average of just 2.48 per cent from 2.73 per cent in 2010. Less than a decade ago, the margin was a far more robust 3 per cent.

Although Canadian banks have increased their overall profits over this period, their share prices have recently been struggling to keep up with the broader market, reflecting investor concerns that earnings growth is being challenged.

“We anticipate that the market’s outlook for growth will moderate further in 2016, encapsulating an even greater slowdown in loan growth and incremental margin pressures,” John Aiken, an analyst at Barclays, said in a note.

Mr. Routledge thinks the banks may also be maintaining higher prime rates, relative to the Bank of Canada’s key rate, out of concerns about credit risk.

“If the economy is slowing so much that the Bank of Canada has cut its policy rate in half” – to 0.5 per cent from 1 per cent in January – “maybe households in particular are not as creditworthy as consensus believes,” he said.

“If that’s the case, you want to put in a little more spread for taking credit risk.”

Restrictions

Thomson Reuters 2012.

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.

Selected data supplied by Thomson Reuters. Thomson Reuters Limited. Click for Restrictions .

Copyright 2016 The Globe and Mail Inc. All Rights Reserved.

444 Front St. W. Toronto. ON Canada M5V 2S9
Phillip Crawley, Publisher

Add to Watchlist

We’ve run into a glitch. Please try again later.

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Customize your reading font


Canada – s big banks cut prime rate after BoC move – The Globe and


#prime interest rate today

#

Canada s big banks cut prime rate after BoC move Add to.

Canada’s big banks followed the Bank of Canada’s interest rate cut, lowering their prime lending rates in a series of moves that nonetheless reinforce the reluctance of lenders to follow the central bank in lockstep.

Toronto-Dominion Bank initially decreased its prime rate – the benchmark for creditworthy borrowers – to 2.75 per cent, down 0.10 percentage points. Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce responded on Wednesday evening, reducing theirs by 0.15 points to 2.70 per cent from 2.85 per cent. That’s a shallower reduction than the central bank’s 0.25-point cut. TD then matched the lower prime rates with an additional cut.

ECONOMY

The Canadian dollar took a nosedive after The Bank of Canada cut its key overnight lending rate by 25 basis points to 0.50 percent saying Canada’s weakening economy is in ‘significant and complex adjustment.’ BNN Video

Economy
ECONOMY

This marks the second time this year that Bay Street has taken a more cautious approach to their lending rates after the central bank has slashed its benchmark in response to disappointing economic activity.

Overall, banks have lowered their prime rates by a total of 0.3 percentage points this year, or nearly half the Bank of Canada’s total reduction of 0.50 points over the same period.

Bank of Canada Governor Stephen Poloz appeared unconcerned by the banks’ response, noting that lending rates can be affected by many factors beyond official monetary policy.

“That’s how financial markets work,” Mr. Poloz said at a press conference. “All we’re trying to do is have an influence on [the lending rate], as opposed to determine it.”

After the Bank of Canada cut its key rate in January, also by a quarter point, the big banks were slow in responding to the surprise move.

When they did react, they took a public drubbing over their refusal to respond with an equal reduction in their prime rates, decreasing them by just 0.15 points.

However, some observers have pointed out that the Bank of Canada may not mind the muted response from the banks.

House prices have soared as borrowing costs have fallen, raising concerns that prices may be overvalued by as much as 30 per cent, according to Bank of Canada estimates. As well, Canadian indebtedness has risen to new heights, making consumers vulnerable to rising unemployment levels or an eventual ramp-up in borrowing costs.

For the banks themselves, the response to the Bank of Canada comes as they attempt to shore up profits driven by their lending activities.

Since the banks make money by lending at higher rates than their own borrowing costs, substantially lower prime rates can compress the spread, or net interest margins.

“We are in such an unusually low-interest-rate environment that the traditional rules of one-for-one [reductions in the prime rate and the Bank of Canada’s key interest rate] don’t work,” Peter Routledge, an analyst at National Bank Financial, said in an interview.

He pointed out that the net interest margin for the Canadian personal and commercial banking operations of the Big Six banks have declined to a weighted average of just 2.48 per cent from 2.73 per cent in 2010. Less than a decade ago, the margin was a far more robust 3 per cent.

Although Canadian banks have increased their overall profits over this period, their share prices have recently been struggling to keep up with the broader market, reflecting investor concerns that earnings growth is being challenged.

“We anticipate that the market’s outlook for growth will moderate further in 2016, encapsulating an even greater slowdown in loan growth and incremental margin pressures,” John Aiken, an analyst at Barclays, said in a note.

Mr. Routledge thinks the banks may also be maintaining higher prime rates, relative to the Bank of Canada’s key rate, out of concerns about credit risk.

“If the economy is slowing so much that the Bank of Canada has cut its policy rate in half” – to 0.5 per cent from 1 per cent in January – “maybe households in particular are not as creditworthy as consensus believes,” he said.

“If that’s the case, you want to put in a little more spread for taking credit risk.”

Restrictions

Thomson Reuters 2012.

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.

Selected data supplied by Thomson Reuters. Thomson Reuters Limited. Click for Restrictions .

Copyright 2016 The Globe and Mail Inc. All Rights Reserved.

444 Front St. W. Toronto. ON Canada M5V 2S9
Phillip Crawley, Publisher

Add to Watchlist

We’ve run into a glitch. Please try again later.

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Customize your reading font


Canada – s big banks cut prime rate after BoC move – The Globe and


#prime interest rate today

#

Canada s big banks cut prime rate after BoC move Add to.

Canada’s big banks followed the Bank of Canada’s interest rate cut, lowering their prime lending rates in a series of moves that nonetheless reinforce the reluctance of lenders to follow the central bank in lockstep.

Toronto-Dominion Bank initially decreased its prime rate – the benchmark for creditworthy borrowers – to 2.75 per cent, down 0.10 percentage points. Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce responded on Wednesday evening, reducing theirs by 0.15 points to 2.70 per cent from 2.85 per cent. That’s a shallower reduction than the central bank’s 0.25-point cut. TD then matched the lower prime rates with an additional cut.

ECONOMY

The Canadian dollar took a nosedive after The Bank of Canada cut its key overnight lending rate by 25 basis points to 0.50 percent saying Canada’s weakening economy is in ‘significant and complex adjustment.’ BNN Video

Economy
ECONOMY

This marks the second time this year that Bay Street has taken a more cautious approach to their lending rates after the central bank has slashed its benchmark in response to disappointing economic activity.

Overall, banks have lowered their prime rates by a total of 0.3 percentage points this year, or nearly half the Bank of Canada’s total reduction of 0.50 points over the same period.

Bank of Canada Governor Stephen Poloz appeared unconcerned by the banks’ response, noting that lending rates can be affected by many factors beyond official monetary policy.

“That’s how financial markets work,” Mr. Poloz said at a press conference. “All we’re trying to do is have an influence on [the lending rate], as opposed to determine it.”

After the Bank of Canada cut its key rate in January, also by a quarter point, the big banks were slow in responding to the surprise move.

When they did react, they took a public drubbing over their refusal to respond with an equal reduction in their prime rates, decreasing them by just 0.15 points.

However, some observers have pointed out that the Bank of Canada may not mind the muted response from the banks.

House prices have soared as borrowing costs have fallen, raising concerns that prices may be overvalued by as much as 30 per cent, according to Bank of Canada estimates. As well, Canadian indebtedness has risen to new heights, making consumers vulnerable to rising unemployment levels or an eventual ramp-up in borrowing costs.

For the banks themselves, the response to the Bank of Canada comes as they attempt to shore up profits driven by their lending activities.

Since the banks make money by lending at higher rates than their own borrowing costs, substantially lower prime rates can compress the spread, or net interest margins.

“We are in such an unusually low-interest-rate environment that the traditional rules of one-for-one [reductions in the prime rate and the Bank of Canada’s key interest rate] don’t work,” Peter Routledge, an analyst at National Bank Financial, said in an interview.

He pointed out that the net interest margin for the Canadian personal and commercial banking operations of the Big Six banks have declined to a weighted average of just 2.48 per cent from 2.73 per cent in 2010. Less than a decade ago, the margin was a far more robust 3 per cent.

Although Canadian banks have increased their overall profits over this period, their share prices have recently been struggling to keep up with the broader market, reflecting investor concerns that earnings growth is being challenged.

“We anticipate that the market’s outlook for growth will moderate further in 2016, encapsulating an even greater slowdown in loan growth and incremental margin pressures,” John Aiken, an analyst at Barclays, said in a note.

Mr. Routledge thinks the banks may also be maintaining higher prime rates, relative to the Bank of Canada’s key rate, out of concerns about credit risk.

“If the economy is slowing so much that the Bank of Canada has cut its policy rate in half” – to 0.5 per cent from 1 per cent in January – “maybe households in particular are not as creditworthy as consensus believes,” he said.

“If that’s the case, you want to put in a little more spread for taking credit risk.”

Restrictions

Thomson Reuters 2012.

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.

Selected data supplied by Thomson Reuters. Thomson Reuters Limited. Click for Restrictions .

Copyright 2016 The Globe and Mail Inc. All Rights Reserved.

444 Front St. W. Toronto. ON Canada M5V 2S9
Phillip Crawley, Publisher

Add to Watchlist

We’ve run into a glitch. Please try again later.

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Canada – s big banks cut prime rate after BoC move – The Globe and


#prime interest rate today

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Canada s big banks cut prime rate after BoC move Add to.

Canada’s big banks followed the Bank of Canada’s interest rate cut, lowering their prime lending rates in a series of moves that nonetheless reinforce the reluctance of lenders to follow the central bank in lockstep.

Toronto-Dominion Bank initially decreased its prime rate – the benchmark for creditworthy borrowers – to 2.75 per cent, down 0.10 percentage points. Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce responded on Wednesday evening, reducing theirs by 0.15 points to 2.70 per cent from 2.85 per cent. That’s a shallower reduction than the central bank’s 0.25-point cut. TD then matched the lower prime rates with an additional cut.

ECONOMY

The Canadian dollar took a nosedive after The Bank of Canada cut its key overnight lending rate by 25 basis points to 0.50 percent saying Canada’s weakening economy is in ‘significant and complex adjustment.’ BNN Video

Economy
ECONOMY

This marks the second time this year that Bay Street has taken a more cautious approach to their lending rates after the central bank has slashed its benchmark in response to disappointing economic activity.

Overall, banks have lowered their prime rates by a total of 0.3 percentage points this year, or nearly half the Bank of Canada’s total reduction of 0.50 points over the same period.

Bank of Canada Governor Stephen Poloz appeared unconcerned by the banks’ response, noting that lending rates can be affected by many factors beyond official monetary policy.

“That’s how financial markets work,” Mr. Poloz said at a press conference. “All we’re trying to do is have an influence on [the lending rate], as opposed to determine it.”

After the Bank of Canada cut its key rate in January, also by a quarter point, the big banks were slow in responding to the surprise move.

When they did react, they took a public drubbing over their refusal to respond with an equal reduction in their prime rates, decreasing them by just 0.15 points.

However, some observers have pointed out that the Bank of Canada may not mind the muted response from the banks.

House prices have soared as borrowing costs have fallen, raising concerns that prices may be overvalued by as much as 30 per cent, according to Bank of Canada estimates. As well, Canadian indebtedness has risen to new heights, making consumers vulnerable to rising unemployment levels or an eventual ramp-up in borrowing costs.

For the banks themselves, the response to the Bank of Canada comes as they attempt to shore up profits driven by their lending activities.

Since the banks make money by lending at higher rates than their own borrowing costs, substantially lower prime rates can compress the spread, or net interest margins.

“We are in such an unusually low-interest-rate environment that the traditional rules of one-for-one [reductions in the prime rate and the Bank of Canada’s key interest rate] don’t work,” Peter Routledge, an analyst at National Bank Financial, said in an interview.

He pointed out that the net interest margin for the Canadian personal and commercial banking operations of the Big Six banks have declined to a weighted average of just 2.48 per cent from 2.73 per cent in 2010. Less than a decade ago, the margin was a far more robust 3 per cent.

Although Canadian banks have increased their overall profits over this period, their share prices have recently been struggling to keep up with the broader market, reflecting investor concerns that earnings growth is being challenged.

“We anticipate that the market’s outlook for growth will moderate further in 2016, encapsulating an even greater slowdown in loan growth and incremental margin pressures,” John Aiken, an analyst at Barclays, said in a note.

Mr. Routledge thinks the banks may also be maintaining higher prime rates, relative to the Bank of Canada’s key rate, out of concerns about credit risk.

“If the economy is slowing so much that the Bank of Canada has cut its policy rate in half” – to 0.5 per cent from 1 per cent in January – “maybe households in particular are not as creditworthy as consensus believes,” he said.

“If that’s the case, you want to put in a little more spread for taking credit risk.”

Restrictions

Thomson Reuters 2012.

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.

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Canada – s big banks cut prime rate after BoC move – The Globe and


#prime interest rate today

#

Canada s big banks cut prime rate after BoC move Add to.

Canada’s big banks followed the Bank of Canada’s interest rate cut, lowering their prime lending rates in a series of moves that nonetheless reinforce the reluctance of lenders to follow the central bank in lockstep.

Toronto-Dominion Bank initially decreased its prime rate – the benchmark for creditworthy borrowers – to 2.75 per cent, down 0.10 percentage points. Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce responded on Wednesday evening, reducing theirs by 0.15 points to 2.70 per cent from 2.85 per cent. That’s a shallower reduction than the central bank’s 0.25-point cut. TD then matched the lower prime rates with an additional cut.

ECONOMY

The Canadian dollar took a nosedive after The Bank of Canada cut its key overnight lending rate by 25 basis points to 0.50 percent saying Canada’s weakening economy is in ‘significant and complex adjustment.’ BNN Video

Economy
ECONOMY

This marks the second time this year that Bay Street has taken a more cautious approach to their lending rates after the central bank has slashed its benchmark in response to disappointing economic activity.

Overall, banks have lowered their prime rates by a total of 0.3 percentage points this year, or nearly half the Bank of Canada’s total reduction of 0.50 points over the same period.

Bank of Canada Governor Stephen Poloz appeared unconcerned by the banks’ response, noting that lending rates can be affected by many factors beyond official monetary policy.

“That’s how financial markets work,” Mr. Poloz said at a press conference. “All we’re trying to do is have an influence on [the lending rate], as opposed to determine it.”

After the Bank of Canada cut its key rate in January, also by a quarter point, the big banks were slow in responding to the surprise move.

When they did react, they took a public drubbing over their refusal to respond with an equal reduction in their prime rates, decreasing them by just 0.15 points.

However, some observers have pointed out that the Bank of Canada may not mind the muted response from the banks.

House prices have soared as borrowing costs have fallen, raising concerns that prices may be overvalued by as much as 30 per cent, according to Bank of Canada estimates. As well, Canadian indebtedness has risen to new heights, making consumers vulnerable to rising unemployment levels or an eventual ramp-up in borrowing costs.

For the banks themselves, the response to the Bank of Canada comes as they attempt to shore up profits driven by their lending activities.

Since the banks make money by lending at higher rates than their own borrowing costs, substantially lower prime rates can compress the spread, or net interest margins.

“We are in such an unusually low-interest-rate environment that the traditional rules of one-for-one [reductions in the prime rate and the Bank of Canada’s key interest rate] don’t work,” Peter Routledge, an analyst at National Bank Financial, said in an interview.

He pointed out that the net interest margin for the Canadian personal and commercial banking operations of the Big Six banks have declined to a weighted average of just 2.48 per cent from 2.73 per cent in 2010. Less than a decade ago, the margin was a far more robust 3 per cent.

Although Canadian banks have increased their overall profits over this period, their share prices have recently been struggling to keep up with the broader market, reflecting investor concerns that earnings growth is being challenged.

“We anticipate that the market’s outlook for growth will moderate further in 2016, encapsulating an even greater slowdown in loan growth and incremental margin pressures,” John Aiken, an analyst at Barclays, said in a note.

Mr. Routledge thinks the banks may also be maintaining higher prime rates, relative to the Bank of Canada’s key rate, out of concerns about credit risk.

“If the economy is slowing so much that the Bank of Canada has cut its policy rate in half” – to 0.5 per cent from 1 per cent in January – “maybe households in particular are not as creditworthy as consensus believes,” he said.

“If that’s the case, you want to put in a little more spread for taking credit risk.”

Restrictions

Thomson Reuters 2012.

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.

Selected data supplied by Thomson Reuters. Thomson Reuters Limited. Click for Restrictions .

Copyright 2016 The Globe and Mail Inc. All Rights Reserved.

444 Front St. W. Toronto. ON Canada M5V 2S9
Phillip Crawley, Publisher

Add to Watchlist

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canadian mortgage rates


#BoC rate cut no – game changer – for housing market

OTTAWA – TD Bank says the Bank of Canada’s latest decision to cut its key interest rate will not be a “game changer” for the country’s housing market.

Some have raised concerns about what the interest rate cut by the central bank could mean for an already hot housing market.

TD said Friday the central bank’s decision resulted in a small move lower for variable rate mortgages, but added the posted five-year fixed rate is the most important factor for the housing market.

“It is the rate that borrowers must be income tested against to qualify for a mortgage, and it most closely follows the five-year government bond yield,” said the report.

How the Bank of Canada influences mortgage rates »

With the yield on five-year government bonds sitting near record lows, TD said there is little room to drop further.

“In fact, we think global forces will pull Canadian bond yields slightly higher as the year rolls forward, as rate hikes in the U.S. draw closer and global conditions improve,” TD said.

The bank upgraded its housing market forecast on Friday, but it attributed the improvement to the large decline in mortgage rates over the first part of the year.

In the updated forecast, TD expects existing home sales to grow 5.1 per cent this year and prices to rise 7.1 per cent. Housing starts are expected to total 187,400.

The prediction compared with a February forecast by the bank that saw a 2.0 per cent drop in existing home sales, prices rising 1.5 per cent and housing starts totalling 177,000.