SERIOUSLY?!

Tim Hortons offers coffee and doughnut as proposed settlement in class action lawsuit

Brett Bundale, The Canadian Press

Tim Hortons has reached a proposed settlement in multiple class action lawsuits alleging the restaurant's mobile app violated customer privacy, which would see the restaurant offer a free coffee and doughnut to affected users. 

The settlement, negotiated with the legal teams involved in the lawsuits, still requires court approval.

The coffee and doughnut chain would also permanently delete any geolocation information it may have collected between April 1, 2019 and Sept. 30, 2020, and direct third-party service providers to do the same.

"We think that it's a favourable settlement because it offers compensation that has a real value," said Joey Zukran, a lawyer with the Montreal-based law firm LPC Avocat Inc., which filed the class action in Quebec.

"Privacy cases across Canada are never guaranteed a win," he said. "Here we have some form of guarantee, some form of recovery ... as opposed to uncertainty that could last."

It's unclear how many customers used the app during the 18-month period ending Sept. 30, 2020, and would be eligible to receive a free hot beverage and baked good.

Restaurant Brands International Inc., the parent company of Tim Hortons, said in an investor presentation in May that it had four million active users during the three months ended March 31, 2022. 

"I think people who receive this will think it’s paltry, but class action settlements are often paltry for the end consumer," said David Fraser, a privacy lawyer with McInnes Cooper in Halifax.

While the individual compensation may not seem like much, he said given the number of people potentially involved "it may be reasonable in aggregate."

Still, others may feel it's not high enough to "act as a disincentive to further mischief," Fraser said. 

"Any time you settle, there's going to be a compromise," he said, adding that the case "reflects how weird privacy harms are."

"If you used that app and Tim Hortons collected your location information without your adequate, informed consent but nothing has happened with that information, you actually haven't suffered what would be considered a tangible harm," Fraser said. 

"You're trying to compensate for the feeling of ickiness, the creepiness somebody might feel knowing that their information was collected without their knowledge or consent."

The proposed settlement comes after an investigation by federal and provincial privacy watchdogs found the mobile ordering app violated the law by collecting vast amounts of location information from customers.

In a report released last month, privacy commissioners said people who downloaded the Tim Hortons app had their movements tracked and recorded every few minutes — even when the app was not open on their phones.

The investigation was launched after National Post reporter James McLeod obtained data showing the app on his phone had tracked his location more than 2,700 times in less than five months.

In a statement, Tim Hortons said it's pleased to have reached a proposed settlement in the four class action lawsuits filed in Quebec, British Columbia and Ontario.

"All parties agree this is a fair settlement and we look forward to the Superior Court of Quebec’s decision on the proposal," the company said in a statement. 

"We are confident that pending the Quebec court’s approval of the settlement, the courts in British Columbia and Ontario will recognize the settlement."

The company said the allegations raised in the class actions were not proven in court and the settlement is not an admission of any wrongdoing.

Tim Hortons said it would be emailing customers Friday to inform them of the proposed settlement.

Tim Hortons said the retail value of a free hot beverage is $6.19 while the value of a baked good is $2.39, plus taxes, according to court documents. 

Customers would be provided with a credit for the items with a coupon or through the Tim Hortons app, documents said. 

Details on the distribution of the free hot beverage and baked good would be provided if the court approves the settlement, Tim Hortons said. 

A hearing has been scheduled in a Quebec court on Sept. 6 to consider the proposed settlement. 

Nordstrom plunges as 'vulnerable' middle-class shoppers tighten belt

Katrina Lewis and John Hyland, Bloomberg News

Investors are getting daily reminders this earnings season that retailers catering to US middle-income shoppers are some of their most exposed bets.

Nordstrom Inc. tumbled 20 per cent Wednesday in its biggest drop since November after slashing its full-year outlook, citing slowing customer traffic and demand at its off-price Rack stores. The slump brings the stock’s year-to-date decline to 18 per cent, narrowing the gap it had established over its department-store peers. 

“The common threads across Kohl’s, Macy’s and Nordstrom this earnings cycle is that they all talked about that middle being most under pressure, versus the low end,” Jefferies analyst Stephanie Wissink said on Bloomberg TV Wednesday. “The middle is the one that seems to be the most vulnerable right now.”

On Tuesday, Macy’s Inc. cut its full-year forecast for profit and revenue, citing tighter consumer budgets. While shares closed higher as the company’s more expensive chains -- Bloomingdale’s and Bluemercury -- outperformed, the stock is still down 29 per cent this year. Last week, Kohl’s Corp. dropped after warning that its middle-income customers are especially pressured in the current environment. 

Until now, Nordstrom’s shares had largely traded higher for the year, with management touting the resiliency of its higher-income customer base. The retailer’s fiscal second-quarter report debunked the magnitude of that advantage as weakness at its Rack stores, which made up about 30 per cent of revenue in the quarter, outweighed strength in its higher-end business.

“While we continue to think the higher income profile of Nordstrom’s average customer positions the company well in the current environment, clearly Nordstrom is not immune to the difficult macro backdrop,” KeyBanc Capital Markets Inc. analyst Noah Zatzkin wrote in a research note.

Nordstrom’s report reinforces how decades-high inflation is impacting shoppers -- and in turn retailers -- differently. Companies that cater to the highest and lowest ends of the income spectrum are holding up better than those that rely on middle-class consumers, though retailers across every price point are seeing signs of slowing spending. 

Still, value-oriented stores have posted solid results for the second quarter. Walmart Inc. rallied after forecasting that its earnings this year wouldn’t decline as much as it had projected, buoyed by robust back-to-school sales, lower fuel prices and more sales to wealthier customers seeking bargains. Warehouse club operator BJ’s Wholesale Club Holdings Inc. climbed to a record last week after reporting stronger-than-expected results.

Deep-discounters Dollar General Corp. and Dollar Tree Inc., which have outperformed other consumer stocks this year, will report earnings Thursday.

BNP Paribas Weighs Sale of Eastern Europe Assets to Raise Cash

Manuel Baigorri, Bloomberg News

A logo on a BNP Paribas SA bank branch in Marseille, France. Photographer: Theo Giacometti/Bloomberg , Bloomberg

(Bloomberg) -- BNP Paribas SA is considering a sale of its consumer finance business in central and eastern Europe as it continues to streamline its portfolio to raise cash, according to people familiar with the matter.

The French bank is working to gauge buyer interest for its BNP Paribas Personal Finance operations in markets including Romania, Hungary and the Czech Republic, the people said. A sale could value the assets at more than $500 million, the people said, asking not to be identified discussing confidential information.

Deliberations are in the early stages and no final decisions have been taken, according to the people. BNP Paribas could still decide against a sale, they said. A representative for BNP Paribas didn’t immediately respond to a request for comment.

BNP Paribas Personal Finance has a presence in 30 countries and counts more than 20 million clients, according to its website. Its services include credit, savings and insurance products.

Earlier this month, the French lender joined European peers in pledging higher profitability and bigger shareholder returns, despite a surge in costs that’s plaguing the industry. Led by Chief Executive Officer Jean-Laurent Bonnafe, the Paris-based bank has vowed to return 60% of profit to shareholders. 

In December, BNP Paribas agreed to sell San Francisco-based Bank of the West to Bank of Montreal for $16.3 billion.

©2022 Bloomberg L.P.

BlackRock, UBS among firms facing Texas ban over energy policies

Amanda Albright, Shelly Hagan and Danielle Moran, Bloomberg News

Texas banned BlackRock Inc., UBS Group AG and eight other finance firms from working with the state after finding them to be hostile to the energy industry. Bloomberg News' Shelly Hagan reports.

Texas is taking steps that could cost BlackRock Inc., UBS Group AG and eight other finance firms business with the state after finding them to be hostile to the energy industry.

Glenn Hegar, the Republican state comptroller, on Wednesday named the firms he considers to “boycott” the fossil fuel sector. The move ends roughly six months of suspense that led Texas municipal-bond issuers to avoid banks whose status was unclear amid the office’s probe into companies’ energy policies. Governmental entities should use the list as a “filtration system” when entering contracts, Hegar said in an interview. 

The comptroller sent inquiries to more than 150 companies in March and April, requesting information on whether they were shunning the oil and gas industry in favor of sustainable investing and financing goals. The survey was triggered by a GOP-backed state law that took effect on Sept. 1, 2021, and which limits Texas governments from entering into certain contracts with firms that have curbed ties with carbon-emitting energy companies. Texas is the nation’s top producer of crude and natural gas.

“The environmental, social and corporate governance (ESG) movement has produced an opaque and perverse system in which some financial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their financial clout to push a social and political agenda shrouded in secrecy,” Hegar said in a statement. 

The announcement is the latest salvo in Republicans’ escalating fight against financial companies that have stepped into political and social issues. On Tuesday, Florida Governor Ron DeSantis eliminated ESG considerations for the state’s pension funds, passing a resolution along with other officials specifying that investments “must be based only on pecuniary factors.”

HEGAR'S LIST

The other companies on the list are BNP Paribas SA, Credit Suisse Group AG, Danske Bank A/S, Jupiter Fund Management Plc, Nordea Bank ABP, Schroders Plc, Svenska Handelsbanken and Swedbank AB. In addition, the comptroller’s office also designated nearly 350 funds that are subject to the same investment rules.

BlackRock, the world’s largest asset manager, said in an emailed statement that the company disagrees with the comptroller’s assessment. 

“This is not a fact-based judgment,” the statement said. “BlackRock does not boycott fossil fuels -- investing over US$100 billion in Texas energy companies on behalf of our clients proves that. Elected and appointed public officials have a duty to act in the best interests of the people they serve. Politicizing state pension funds, restricting access to investments, and impacting the financial returns of retirees is not consistent with that duty.”

A spokesperson for UBS said the company also disagrees with the decision. “We provided their office with extensive information on our policies and practices, demonstrating that UBS does not boycott energy companies even under a broad interpretation of Texas law,” the statement said. 

A Schroders spokesperson said the company doesn’t boycott fossil fuels and has US$19 billion allocated to companies active in the energy sector globally.

A Credit Suisse representative said the company would look to engage with the comptroller to resolve the matter, saying it doesn’t boycott the energy industry.

“As we noted in our response to the Texas comptroller, Credit Suisse is not boycotting the energy sector as the bank has ongoing partnerships and strong client relationships in the energy sector,” the statement said.

Spokespeople for BNP, Danske, Jupiter Fund Management, Nordea, Svenska Handelsbanken and Swedbank didn’t respond to requests for comment.

State pension funds including the Teacher Retirement System of Texas will be required to divest from the companies, though the law includes exceptions, according to Hegar. Within 30 days, state entities like pensions will be required to notify the comptroller of any holdings on the divestment list. The teacher’s pension had US$201 billion of investments in 2021, according to the system.  

The list may be modified and the comptroller’s office said it will review information on an ongoing basis. 

ESG SHIFT

The dust-up has its roots in a shift by some asset managers and banks to prioritize policies that take ESG factors into account. The firms say they’re simply responding to customer demand for strategies intended to do good for the world while also enriching investors. Because of their contributions to pollution and greenhouse gases that help fuel climate change, oil and gas companies are often excluded from ESG funds.

Dozens of firms defended their policies in responses to Hegar’s survey, saying they don’t boycott the energy industry but are required to act in their customers’ interests. 

Hegar said in a statement that financial institutions are guilty of “doublespeak” as they “engage in anti-oil and gas rhetoric publicly yet present a much different story behind closed doors.”

BlackRock told Hegar in a May letter that it’s committed to helping clients invest in the energy industry. The firm said it oversees about US$310 billion of investments in energy firms worldwide, including in Texas companies. 

The money manager landed on the list after being targeted by conservative lawmakers from a bevy of states. In August, 19 state attorneys general, including Texas’s, wrote a letter accusing BlackRock Chief Executive Officer Larry Fink of pursuing sustainable investments instead of shareholders’ profits. 

To be sure, it’s unclear how the list will impact firms currently doing business with Texas and how exactly the statute’s provisions would be implemented. Lawyers will likely be wading through the details for months, examining allowed exceptions and parsing the fine print. One exception written into the new law says pensions aren’t required to divest from the banned companies if doing so would hurt their performance.

The law, Senate Bill 13, bars governments from entering into contracts of US$100,000 or more with companies unless the firms verify that they don’t boycott the energy industry. There are exemptions for that portion of the law, too. Municipalities can sidestep it if they determine that compliance would violate the government’s constitutional or statutory duties related to the sale of debt or management of funds.

Some Texas muni issuers had been skittish toward companies caught up in the comptroller’s probe, and now that the list is out, some underwriters that avoided being named by Hegar may find they’re freer to do business again.

The state’s public-finance market, one of the nation’s biggest, has also been roiled by a separate GOP-backed law targeting Wall Street for taking on policies around firearms. Bank of America Corp., Goldman Sachs Group Inc., and JPMorgan Chase & Co. haven’t underwritten a municipal-bond deal by the state or its municipalities since the gun law took effect in September.

Texas isn’t alone in attempting to punish Wall Street for pursuing ESG-focused initiatives. 

States including Oklahoma, West Virginia and Kentucky have passed legislation this year targeting companies that engage in “boycotts” of the oil and gas industry. In July, West Virginia said it wouldn’t award state banking contracts to five firms: JPMorgan, Wells Fargo, Goldman Sachs, BlackRock and Morgan Stanley. 

BLUE VS GREEN H2

Canada's plans to help European energy woes may not have room for Alberta

Wed, August 24, 2022 

The CBC’s Vassy Kapelos interviews German Chancellor Olaf Scholz, in Toronto, on Aug. 23, 2022 during the European leader’s first trip to Canada. Scholz said he would like to see more natural gas exports from Canada to address energy woes. (Evan Mitsui/CBC - image credit)

The Russian war in Ukraine has had the side effect of cutting off a large portion of natural gas to Germany, and Chancellor Olaf Scholz was in Canada to sign a deal with Prime Minister Justin Trudeau on hydrogen energy.

While there is a desire from Germany to find more natural gas in the meantime, there appears to be little appetite to add the necessary infrastructure — including a plant for liquefied natural gas on Canada's East Coast.

"We would really like Canada to export more [liquefied natural gas, LNG] to Europe," Scholz told host Vassy Kapelos on CBC News Network's Power & Politics Tuesday.

But Scholz said there are no business cases at the moment, and Trudeau said it would be a costly endeavour with little upside as Germany looks to quickly move into renewable energy to become more self-sufficient.

Alberta produces over 60 per cent of Canada's natural gas, and this creates an uncertain future for the hopes of increasing buyers around the world. Currently, the United States is the biggest foreign buyer of Alberta natural gas.

In a statement, Alberta's Associate Minister of Natural Gas, Dale Nally, pushed back on the cool reception to the resource.

"There is a clear business case to increase market access for Canada's LNG off the east coast, and not acknowledging it is another case of the federal government refusing to act in the best interests of Albertans, Canadian, and the world."

Chris Young/The Canadian Press

'Very little import capacity'

With roadblocks in the way of adding export capacity in Canada and a lack of plans to improve the intake of natural gas in Germany, experts say Alberta is caught in the middle.

"There's very much a limit on how much of that can be done because of the import capacity that exists, and in Germany in particular there's very little import capacity," said Sara Hastings-Simon, assistant professor at the department of physics and astronomy at the University of Calgary.

LNG Newfoundland and Labrador Ltd.

Alberta's vision for the natural gas industry does set sights on two or three large-scale liquefied natural gas projects to improve exports, though this does not solve the immediate need for energy Germany faces.

Nally criticized previous governments for not capitalizing on opportunities to make the most of natural gas.

"Alberta and Canada already missed the first LNG wave, we cannot afford to miss the second. Several LNG projects are already operating in the U.S. with more under construction. Canada only has one LNG export project currently under construction: LNG Canada on the West Coast, which is getting nearer to completion," he added in an emailed statement to CBC News.

Natural gas can have a role to play in developing hydrogen energy, however this also does not create the true green version that Germany said it's looking for. Hastings-Simon said this can also leave Alberta out of the equation for supplying hydrogen overseas.

Amit Kumar, a professor in the faculty of engineering at the University of Alberta, helped advise the Alberta government on its hydrogen plans, and agreed there are significant hurdles for the province, as a country such as Germany wants to move more quickly into a clean energy system.

"We should keep in mind there are different baskets of options for decarbonization, and hydrogen is one of them, and we should initially transition with what is commercially available and cheaper," he said.

The future for hydrogen

Developing hydrogen production capacity in Alberta has been underway for some time, but the future role it could play locally and internationally in supplying the grid remains a question.

"It provides an option and alternative to natural gas," said Kumar. "But my sense is in the longer term, it will be part of the decarbonization of our Alberta energy system, but it will be an option along with other options of decarbonization."

Jeff McIntosh/The Canadian Press

The province has plans for more commercial capacity for hydrogen energy created with the help of natural gas by 2030. But it will also be faced with wait times for regulatory reviews and the high upfront cost of adding production capacity for the resource.

"It's much more expensive, it's much less energy dense, there are potential safety issues involved with hydrogen, and the infrastructure that we have in place is certainly inadequate to use it commercially," added Richard Masson, executive fellow at the University of Calgary School of Public Policy.

"There's a long way for us to go from here to there."

Looking at how to balance the books by exporting different forms of energy also brings another challenge to the forefront.

While hydrogen seems like a futuristic option to give green energy, there are still significant plans in place in countries like Germany to utilize more wind and solar energy.

"It's not going to be a one-for-one replacement for Alberta's or Canada's energy exports," said Hastings-Simon. "I think if we have that expectation, we are going to be disappointed

Canada has short window to get ahead of U.S. hydrogen efforts, backer warns

Mia Rabson, The Canadian Press

It is feasible to start exporting small shipments of Canadian-made hydrogen to Europe within three years but only if everyone moves quickly, the chairman of a company behind one of the biggest proposed green hydrogen projects in Atlantic Canada said Wednesday.

As the ink dried on the new Canada-Germany hydrogen alliance signed in Newfoundland and Labrador on Tuesday, World Energy G2 consortium director John Risley said time is of the essence.

World Energy G2 has applied to the Newfoundland government to build a hydrogen plant powered by a three-gigawatt wind farm near the western port town of Stephenville. The product, known as "green" hydrogen because it is made by splitting water atoms using zero-emission renewable energy, is the type Germany wants.

Risley said the application to the provincial government to get the needed permits went in last spring, but things are moving slowly.

"We're encouraging them to understand that the opportunity for this industry is now," he said. "It's not something we can sit on our hands and sort of say, 'Oh, well, we're going to take our time and we're going to spend a couple of years sort of thinking this through,' because the opportunity will have been lost."

The issue isn't that others will swoop in and steal customers. There are plenty of those to go around. The issue is that the Canada-Germany agreement is aiming to get things flowing by 2025, and there are only so many companies and so many supplies available to build hydrogen plants from the ground up, Risley said.

The recently signed Inflation Reduction Act in the United States includes a lucrative hydrogen tax credit for projects that get going within the next year, which Risley said will be "an enormous stimulant" to a U.S. hydrogen industry.

"This is a very early-stage industry, there are not a lot of robust supply chain support industries to stand this industry up and it's going to become very quickly overwhelmed."

The industry is so young, a demonstration by one of the companies in the consortium fell flat during a trade show in Stephenville, hastily thrown together as a backdrop for the hydrogen agreement.

Prime Minister Justin Trudeau and German Chancellor Olaf Scholz toured booths at the show set up by various companies including one with toy cars powered by syringes of hydrogen. But when the leaders tried to race the cars, they failed. Scholz's moved only a few centimetres. Trudeau's didn't move at all.

Trudeau and Natural Resources Minister Jonathan Wilkinson are both quick to acknowledge that a year ago, Canada's discussions about hydrogen were looking into a much more distant future.

But when Russia invaded Ukraine and destabilized European energy supplies, the desire to move faster to replace oil and gas with renewables and clean energy exploded.

In the last six months, more than a dozen new Canadian hydrogen projects began moving faster, including Risley's.

The speed is worrisome to some in Newfoundland, who fear getting into the game quickly is coming at the cost of proper scrutiny.

As Trudeau and Scholz landed in Stephenville on Tuesday afternoon, hundreds of people from the town of about 6,000 lined the fences around the airport tarmac to watch with interest and excitement. But outside the building holding the trade show, several dozen protesters stood in the rain.

Some were of the anti-Trudeau "Freedom Convoy" ilk, but many were there to raise their opposition mainly to the installation of hundreds of wind turbines in their neck of the woods.

The G2 project is to be built in three phases with 164 turbines in each.

Paul Wylezol, chair of the International Appalachian Trail, told The Canadian Press last week he has concerns about the environmental risk those turbines pose.

Risley said the consortium is working with residents to allay fears and respond to concerns, intends to sign agreements with local First Nations, and do anything else required in a robust permit process.

"We will do all those things," he said. "We just need to be able to do them contemporaneously, we can't do them sequentially. Because we'll end up in a multi-year permitting process that will be not just incredibly expensive, but put us in the back of the line in respect of the supply chain issues I described."

He said if product is going to be produced by 2025, construction has to start next year.

The G2 project intends to really make ammonia — a combination of hydrogen and nitrogen — for which marine shipping options already exist. Once in Europe, the ammonia would either be used directly, or split back into hydrogen and nitrogen.

The end uses of hydrogen are varied. Hydrogen is already a key component in oil refining and steel production but most of the hydrogen used there is made from natural gas in a process that contributes carbon dioxide to the atmosphere.

Hydrogen also has developing uses as a source of electricity or heat and to power vehicles.

RBC sees $10B influx into GICs as return rates jump

Michelle Zadikian, BNN Bloomberg

There’s more evidence that higher return rates and the security of Guaranteed Investment Certificates (GICs) have captured investors’ attention amid recent market volatility.

Executives at Royal Bank of Canada said they have seen billions of dollars flowing into GIC products in recent months.

“We've had about over $10 billion that has been pushed into the GIC book,” Nadine Ahn, chief financial officer at RBC, said during the company’s conference call with analysts to discuss the bank’s latest quarterly results Wednesday.

“When we look at other consumer credit, we are still in a position where we see high liquidity, and consumer accounts growth is slowing as you look at things like the chequing account, where we've seen a lot of liquidity pushed into our GIC book.”

After years of meagre returns, GICs have made a comeback as their return rates surge alongside benchmark interest rates. Many one-year GICs now offer return rates at or above four per cent.

Ahn said Canadian retail investors pulled a net total of $4 billion out of the bank’s equity and fixed-income funds in the most recent quarter because of the elevated market volatility, but added that a “good part” of that money flowed into GICs.

RBC substantially missed profit estimates in its fiscal third quarter as its capital markets division dragged on the bottom line and the bank built up its cash on hand to handle loans that could potentially go bad.

“In terms of the sort of risk-off stance of the mass retail investor between rates and the market uncertainty, they are looking for a guaranteed preservation of capital and now have incentive in terms of the GIC product,” Neil McLaughlin, RBC’s group head of personal and commercial banking, said on the call.

Loan caution may give Canadian banks first profit drop since '20

Kevin Orland, Bloomberg News Aug 22, 2022

Canada’s six largest banks are expected to report their first decline in earnings in two years as rising economic pessimism spurs them to stockpile more capital to protect against potential loan losses.

Net income for the country’s six largest lenders is expected to fall 4.5 per cent  to a combined $14.4 billion (US$11.1 billion) for their fiscal third quarter, according to the average of analysts’ estimates compiled by Bloomberg. It would be the first drop from a year earlier since the same quarter in 2020. Earnings reports start Tuesday, kicked off by Bank of Nova Scotia.

Canada’s banks are facing what Credit Suisse Group AG analyst Joo Ho Kim calls a “dual timeline,” with loan growth strong and rising interest rates making debt more profitable in the near term, but the longer-term outlook clouded by the risk that central banks’ rapid rate increases may lead to a recession that slows growth and causes defaults.

“The outlook forward -- and the uncertainty associated with that -- is what the banks are worried about at this time,” Joo Ho said in an interview. “That impacts the banks in terms of how they manage their balance sheets in terms of allowances and capital.”

Reporting Date:

• Aug. 23, Bank of Nova Scotia
• Aug. 24, Royal Bank of Canada, National Bank of Canada
• Aug. 25, Canadian Imperial Bank of Commerce, Toronto-Dominion Bank
• Aug. 30, Bank of Montreal

That tension between present strength and future concerns is evident in the divergence between analysts’ projections for the banks’ profit including provisions for credit losses, and for earnings excluding those set-asides. While Joo Ho expects a 2 per cent  decline in the Big Six banks’ core earnings per share for the third quarter, he’s forecasting a 6 per cent  gain in pretax, pre-provision profit.

The banks’ set-asides for credit losses in the quarter ended July 31 are expected to swell to $1.71 billion, according to the estimates. That’s more than six times the amount in the previous quarter and a swing from $409 million in releases a year earlier.

Still, the banks’ third-quarter results are expected to show net interest margins receiving a “nice lift” from higher rates while continued strong loan growth may put net interest income at or near a peak, Paul Holden, an analyst at Canadian Imperial Bank of Commerce, said in a note to clients. 

Net interest income -- the difference between what banks earn from loans and what they pay out in deposits -- is expected to be up 3.7 per cent  from the second quarter, according to analysts’ estimates.

“Loan growth remains strong for now, however we expect a deceleration of growth in the coming quarters as demand for credit tempers with higher borrowing costs and a slowing economy,” Holden wrote. 

The eight-company S&P/TSX Commercial Banks Index has fallen 6.4 per cent  this year, while the broader S&P/TSX Composite Index is down 5.2 per cent .

While lending remains robust, the banks’ capital-markets units likely took a hit last quarter as plunging stock prices froze the market for initial public offerings and other share sales. Still, the quarter’s turbulent markets may have spurred gains in trading revenue to counter declining investment-banking fees. 

“Investment-banking activities have ground to a halt,” Gabriel Dechaine, an analyst at National Bank of Canada, told clients. “However, as US bank results showed us, we could still see strong trading-revenue growth.”

The trajectory of expenses will be another focus in this week’s reports. With Canada’s labor market historically tight, lenders including CIBC, Royal Bank of Canada and Bank of Nova Scotia have been boosting pay for workers. With salaries and benefits accounting for more than half of most banks’ non-interest expenses, those cost pressures could start to eat into the companies’ bottom lines.

Non-interest expenses are expected to be up 0.4 per cent  from the second quarter and 3.7 per cent  from a year earlier, analysts estimate.

“While the ongoing economic recovery and increased business activity will continue to driver higher discretionary spend, the banks also highlighted that inflationary pressures are also anticipated to spur higher salaries and benefits,” John Aiken, an analyst at Barclays Plc, wrote in the note to clients. “After holding expenses largely in check over the past couple of quarters, we anticipate expenses will edge higher through the second half of the year.”

Prairie provinces leading on economic growth, report says

The Canadian Press

The Conference Board of Canada says the Prairie provinces will likely be the top economic performers this year, even as the Bank of Canada's inflation-fighting measures quell the country's overall economic output.

In a new report looking at factors that will drive Canada's provincial economies between 2022 and 2024, the not-for-profit think tank says Saskatchewan will lead the country with real growth of 7.6 per cent this year and Alberta will see a 4.9 per cent gain. 

It says the oil and gas sector will propel the Saskatchewan and Alberta economies through 2024.

The report also says Newfoundland and Labrador will see stronger economic growth when offline oil production restarts in 2023.

An aging population could hold back growth for Quebec, the report adds, while a reversal in the remote work trend will limit gains in Atlantic Canada as some workers move away, particularly in Nova Scotia and New Brunswick.

The report says a pickup in the manufacturing, hospitality and recreation sectors will likely provide an economic boost in Ontario and British Columbia.

CANADA

Millennials still determined to own a house, survey finds

Hilary Punchard, BNN Bloomberg

Millennials are optimistic about owning a home, with six-out-of-10 believing they will be able to buy a house in the future, according to a survey by Royal LePage.

In the survey of 2,003 Canadians aged 26 to 41, 68 per cent of non-homeowners say buying a house is an important life goal to them.

The report, released on Wednesday, found there could be a surge of millennials looking to buy a home in the next few years. Across the country, more than four million individuals (51 per cent) are planning buying a house within five years.

"Policy makers should take note that between millennial demand, immigration and the growing pipeline of those who could not transact over the last two years, more supply is required,” said Phil Soper, president and CEO of Royal LePage, in the press release.

“We could see another surge in price appreciation, following short-term economic softening, when these sidelined purchase intenders transact."

 

COST OF LIVING CONCERNS

According to the survey, 72 per cent of Canadian millennials would want to buy a home in their current city, if the cost of living was not a problem.

Canadians living in Vancouver (58 per cent), Montreal (54 per cent) and Toronto (48 per cent) are the most concerned that their current salaries will not increase enough to be able to buy a home in their current area.

 

PRIORITIZING REMOTE WORK

The survey found 40 per cent of millennials would find a new job if that meant they could work remotely.

The top motivators include cutting back commuting costs and time spent in traffic, while also being able to manage household duties while working from home.

"Currently the largest proportion of our population, and so arguably the most impactful, millennials are a resilient group who are willing to make the necessary sacrifices in order to reach this milestone,” Soper said.

Methodology

An online survey of 2,003 Canadian millennials aged 26-41 was completed between June 10, 2022, and June 16, 2022, using Leger's online panel. Weighting has been employed to ensure that the sample composition accurately reflects the adult population of Canada, as per the latest Census Data. No margin of error can be associated with a non-probability sample (i.e. a web panel in this case). For comparative purposes, though, a probability sample of 2003 respondents would have a margin of error of ±2.2 per cent, 19 times out of 20.