An in-depth analysis of Canadian finance in 2024

A Year of Financial Shifts in Canadian Banking: Key Numbers and Insights

2024 was a year marked by significant changes in the Canadian banking sector, driven by mergers, regulatory shifts, and market dynamics. Here’s a breakdown of the major financial events and figures that shaped 2024:

Table of Contents

Market Overview

RBC’s Market Capitalization: RBC emerged as Canada’s largest company with a market cap of $246 billion at year-end, up from nearly 30% compared to its previous year. This growth was partly attributed to the bank’s acquisition of HSBC Canada and easing sector-specific investor concerns.

Major Events

RBC-HSBC Acquisition: RBC completed the acquisition of HSBC Canada, which bolstered its mortgage presence in a competitive market. The deal also highlighted ongoing challenges in rate competition within Canadian banking.
Legal Suit Against RBC: RBC faced a wrongful dismissal lawsuit regarding a former CFO’s termination. While details about the legal battle were sensitive and not fully disclosed, it underscored the volatility of executive roles in the sector.

Capital Movements

Share Buybacks: Many banks executed share buyback programs, with RBC announcing significant buybacks aimed at rewarding shareholders while navigating regulatory scrutiny.
Fossil Fuel Funding: Significant portions of fossil fuel-related funding remained unchanged from pre-pandemic levels, reflecting ongoing investments in renewable energy and sectoral adjustments.

Regulatory and Structural Changes

Interest Rate Caps: The federal government introduced regulations capping annual interest rates on consumer loans at 35% APR, with further restrictions on payday lending. This move aimed to protect consumers amid rising borrowing costs.
New Capital Inflows: Canada attracted substantial foreign investment in banking, driven by a resilient economy and attractive returns. Notable inflows included $1 billion from the U.S., underscoring global demand for Canadian assets.

Company Performance

Howard Levitt’s Resignation: Howard Levitt stepped down as CEO of Laurentian Bank after nearly 40 years, marking a significant transition in the industry’s leadership.
Executive Compensation: RBC’s executive compensation packages saw increases linked to performance metrics like ROE (Return on Equity) and revenue growth. These changes aimed to align incentives with company success.

Regulatory Developments

Payday Lending Rules: The federal government introduced stricter rules to cap interest rates on short-term credit, aiming to balance consumer protection with market competition.
Bond Yield Fluctuations: Government bonds saw fluctuating yields due to changing inflation expectations and macroeconomic factors, influencing borrowing costs across the economy.

Company-Specific Outcomes

RBC’s Revenue Surprise: RBC reported higher-than-expected revenue, driven by increased lending activity amid a resilient housing market. However, net earnings remained steady due to restructuring initiatives.
BCS Bank Bonuses: Canadian banks distributed significant bonuses, with BCS Bank offering $10 million in annual payouts for the second year, reflecting strong performance and investor confidence.

Looking Ahead

2025 Outlook: With mixed signals from regulatory changes and economic conditions, 2025 is expected to be a challenging year for Canadian banking. Key factors include potential rate hikes by the Bank of Canada and ongoing impacts of foreign investment trends.

This year was defined by both opportunity and uncertainty in the financial landscape, with banks navigating macroeconomic shifts while maintaining profitability and stability.