In this world of endless financial uncertainty, are there any businesses that are absolutely guaranteed to make a healthy profit, regardless of how bad things get in the rest of the economy? In Canada at least, the obvious answer are the ‘Castles on Bay Street’, our chartered banks.
It’s getting harder to make a profit in oil and gas, manufacturing has left the country, and heaven knows the mass media stopped being a ‘license to print money’ a long time ago. But those banks are a truly amazing money machine.
The Royal, which is the largest, reported a third quarter profit of $2.5 billion, 4% higher than the same time a year ago. CEO David McKay is worried about what he describes as ‘impaired loans’ – that’s money they’ve lent to resource companies for major new projects. Some of those are bound to go bad if commodity prices don’t recover, but the bankers are certain to find a way to keep the bottom line moving up.
It’s the same story at TD, CIBC, ScotiaBank, and the Bank of Montreal. The secret is in the spreads. That’s the difference between the interest that banks charge on loans, and the interest they pay on savings. A businessman would have to be pretty stupid not to succeed in this game.
So what do we get from the Bay Street boys in return? Do they create thousands of well paying jobs? Not really. With most of us doing almost all of our banking online, they don’t need nearly as many people behind the counter as they used to. Wages are not much better than what you can earn stocking the bins at Walmart, and don’t even think about trying to organize into a union.
Even with that, the banks have been known to cut corners and save a buck by abusing the Temporary Foreign Worker Program , and relying on cheap call centres located offshore.
In short, these guys are simply too big to fail. Why do people rob them ? Because that’s where the money is silly.
I’m Roger Currie
