In the bustling financial landscape of Canada, a call for change is resonating from the top echelons of its banking sector. The chief executives of the nation’s major banks are strongly advocating for the federal government to dismantle internal trade obstacles, reevaluate tax policies, and reconsider regulatory frameworks. These leaders are sounding alarms over the economic uncertainties that loom large, primarily due to challenges in tariffs and trade.
Despite outperforming analysts’ predictions with their first-quarter earnings, the six powerhouse banks—which control a whopping 90% of the Canadian banking market and rank among the country’s foremost public companies—are taking precautions. They’re setting aside significant reserves to guard against potential loan defaults in this volatile economic environment.
This week’s earnings calls saw a unified chorus from the bank leaders, all raising similar concerns. Adding to the tension is U.S. President Donald Trump’s looming threat to slap a 25% tariff on most imports from Canada by March 4.
“The bank executives are making themselves heard… they’re keenly pushing for a reduction in regulatory pressure,” commented Kevin Burkett, the portfolio manager at Burkett Asset Management. His firm holds shares in major banks like the Bank of Montreal, Royal Bank of Canada, and TD Bank.
Such tariffs from the Trump administration could spell trouble: stunting economic growth, triggering job losses, and inflating the prices of goods across both the U.S. and Canada. After all, approximately 75% of Canadian exports head south to the U.S.
TD Bank’s CEO, Raymond Chun, struck a chord by stating, “The current scenario is a wake-up call for Canadian governments and businesses. We must unite to clear the roadblocks hampering national productivity and bolster our global competitiveness.”
Chun and his fellow executives emphasized the need for government action to ease inter-provincial trade barriers and expedite projects in minerals, energy, and resources. Royal Bank of Canada’s CEO, Dave McKay, also chimed in, suggesting this as a pivotal moment for “structural improvements to enhance economic productivity and competitiveness in Canada.”
Highlighting the potential benefits of such improvements, McKay noted, “This can open doors to future growth and deliver significant benefits to all Canadians amid the prevailing uncertainties.”
Adding to the discourse, Laurent Ferreira, CEO of the National Bank of Canada, proposed the appointment of a ‘head of deregulation’ in Ottawa. Their role would focus on cutting through “unproductive red tape” and lightening the regulatory load on businesses, thereby safeguarding Canadian business ownership.
On the path of diversification, Canadian banks haven’t limited themselves to domestic confines. They’ve actively sought growth beyond borders, with three of the top six eyeing expansion of their retail operations in the U.S. In a strategic pivot, the Bank of Nova Scotia has reduced its stake in South America to invest in U.S.-based lender KeyCorp, though it remains invested in enhancing trade across the U.S., Canada, and Mexico.
Scott Thomson, leading the Bank of Nova Scotia, emphasized the need for Canada to ramp up investments, commit to energy policies that boost oil and gas exports, and streamline the development of natural resource projects. “The banking industry has a crucial role to play in championing a more deliberate national economic agenda,” he articulated.
Meanwhile, Bank of Montreal’s CEO, Darryl White, observed a shift in client behavior on both sides of the border, noting a trend towards prudence in capital investments.
(Reporting by Nivedita Balu in Toronto; Editing by Paul Simao)
