Canadian bank CEOs find solace in strong economic fundamentals amid market volatility

The leaders of some of Canada’s biggest banks said Tuesday that they are still seeing strong economic fundamentals such as job growth, which is giving them solace amid the recent rough patches in the markets.

“I think the markets have taken a pause now and have come back and seen that things are pretty solid,” Royal Bank of Canada president and chief executive officer Dave McKay said at his company’s Canadian bank CEO conference in Toronto.

“So we’re seeing strong fundamentals. And I think that bodes well for growth this year.”

McKay said his bank was seeing strong growth in commercial loans and strong demand for underwriting, among other things.

And other than the market volatility, which does affect RBC’s business, McKay said the lender is “feeling pretty good about things.”

The comments come after a rocky end to 2018 for the markets, as well as some ups and downs that have persisted into 2019. For the banks, however, their performances can follow that of the broader economy, which the CEOs say is still doing well enough despite the recent volatility in the markets.

Toronto-Dominion Bank president and CEO Bharat Masrani called the current situation a “paradox,” albeit one that could affect market-based revenues for financial institutions.

“The fundamentals continue to be very supportive,” Masrani said. “But you do have this volatility on the capital markets side, which could provide some uncertainty going forward.”

Bank of Montreal CEO Darryl White said it may be a difficult period for capital markets and wealth management clients, but “market-exposed” businesses have been known to bounce back quickly.

“I’ve looked at periods of volatility that were in fact more significant than this, perhaps not as prolonged,” White said. “But if this isn’t particularly prolonged, I don’t think we should worry about it too much for the long run.”

White added there has also been a “meaningful juxtaposition” between that situation and what they are seeing with clients doing business in the real economy underpinning those markets.

“The underlying performance of those companies that we deal with is very good,” he said. “Credit quality is not being affected to any extent as we look at it today, and spending patterns continue and unemployment continues to decline. So there’s a real dichotomy in my mind.”

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