Canada’s big bank profits, fees, and feelings

2 minute read

You know what makes some people mad? Bank fees. You know what makes them even madder? Bank profits. Record profits, especially. And during a pandemic? Watch out.

Last week we saw a collision of all three, as news emerged of some Canadian banks hiking fees. This was quickly followed by those very banks announcing quarterly results which were, shall we say, strong. More than eleven billion dollars in profit, strong.

Predictably, Jagmeet Singh pounced, grilling both the Prime Minister and Finance Minister during Question Period. And why not? This is right in the NDP’s wheelhouse. Any left-wing wedge issue which separates them from the Liberals is a good issue for the NDP.

As for the government, it was clear they were caught flat-footed. By falling back on the ‘tax fairness’ argument, the government knowingly conflates two distinct issues to give the appearance of acting tough on those who have benefitted from the pandemic. In fact, this is a less-than-ideal position to be in ahead of a potential election in which victory is largely tied to coalescing left-wing voters. 

That said, the NDP’s politically clever claim of an easy fix is hopeful at best. The fact is, the government knows there’s little they can do about bank profits, unless they decide to invest a significant amount of time, energy, and resources targeting the issue. And while that may feel like an attractive way out of this jam, it likely doesn’t have a big electoral payoff. The truth is, Canadians have mixed emotions about their banks. Indeed, quarterly bank profits are the canary in the COVID coal mine. And it appears the canary is singing loudly. 

Bank profits could be taken as a positive economic indicator. A portion of the recent profits are unused loan-loss provisions which reflect lower-than-normal consumer and business insolvencies. That’s largely due to government support programs. But that point aside, what Canada’s banks are signalling is that the economic hardship caused by COVID-19 is largely behind us. It lifted earlier than expected, and wasn’t as bad as predicted. So, all in all, good news.

Anger in reaction to bank profits and fee increases doesn’t typically linger. But that’s a pre-COVID truth. In a COVID, and post-COVID world, however, reaction to excess gains may last longer. That theory will be put to the test with still a few more quarterly earnings left to report this year. In the meantime, the Liberals need better policy solutions or at least, better talking points. Unless they’re willing to risk voter anger at the ballot box. And you can take that to the bank.

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