BMO, CIBC eye energy, economy
Bank of Montreal chief executive Bill Downe told shareholders Tuesday that the level of apprehension about markets and the price of oil has been “disproportionate to the evidence” as a result of the 24-hour news cycle.
“Real insight takes time to emerge in order to be processed and understood. And when information is speeding across the world in terabits per second, updates every few minutes can become a repetitive blur,” Downe said at the bank’s annual meeting in Toronto
“To the purveyors of news, or at least some, wrapping each new perspective in the cloak of catastrophe is often the only way to keep our attention.”
Bank of Montreal’s loanloss provisions are expected to rise from their very low level as a result of the price of oil and other commodities, but the market price correction “does not mean that an enviable national asset has suddenly become a liability,” Downe said.
“The direct impact on the performance of the bank will be moderated by the experience we have in the sector and the relative low concentration in a diversified portfolio, just two per cent of our outstanding loans,” he said.
It is worth noting that economic fundamentals in both Canada and the United States remain positive, Downe said, adding that consumer spending is strong in most regions as a result of low interest rates, steady job growth, and cheaper fuel prices.
“We continue to believe that we’ll experience positive GDP growth of close to two per cent in Canada and above two per cent in the U. S.,” the CEO of BMO, Canada’s fourth-largest bank, told shareholders.
A report from TD Economics on Tuesday upgraded the outlook for the Canadian economy in 2016 and 2017, driven by a recent pick-up in export growth. However, the forecast upgrades are largely concentrated in the provinces of Quebec, Ontario, Manitoba, and British Columbia that rely more heavily on nonenergy manufacturing.
“In contrast, the negative economic hit from low oil prices is now expected to deepen in Alberta, Newfoundland and Labrador, and Saskatchewan,” the TD Economics report said. “Together, 2015 and 2016 will mark the sharpest economic underperformance of oil- dependent economies relative to the rest of Canada since the oil crash of the 1980s.”
Energy prices and the economy were also on the agenda when shareholders of Canadian Imperial Bank of Commerce gathered in Vancouver on Tuesday.
CIBC chief executive Victor Dodig said the bank faces a number of “headwinds” including a low-growth, low-interest-rate environment here in Canada, and weak energy prices. Still, he said Canada’s fifth-largest bank is committed to achieving sustainable earnings per share growth of five to 10 per cent over the medium term.
Dodig said expanding into the U.S. market remains “strategically important” for Canadian Imperial Bank of Commerce, but insisted there is no rush.
“We know that our business banking and our corporate banking clients are expanding … into the U. S.,” Dodig said. “We want to be able to bank them, both from a lending and deposit standpoint.”
Executives have been “actively looking” at operations t hat would complement CIBC’s Atlantic Trust franchise, a U. S. private- wealth manager for high-net-worth clients purchased in 2013, he said.
But he told shareholders the bank intends to remain patient and disciplined, and won’t buy anything that doesn’t meet the acquisition criteria, including a good cultural and strategic fit, and the ability to deliver growth within a target time frame.
In December, CIBC announced plans to sell its minority stake in American Century investments to Nomura for US$ 1 billion, after it became clear the Canadian bank would not attain a controlling interest in the U. S. wealth manager.
Once that sale closes, the proceeds will boost the coffers for a future acquisition, Dodig said.