Inflation pays banks, BN CEO admits

Banque Nationale (BN) will continue to benefit from interest rate hikes in 2023, the Quebec financial institution’s big boss Laurent Ferreira said Monday.

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The rate hike “had a big impact [sur la rentabilité de la banque] in 2022 and we will see this effect continue into 2023,” Ferreira said at a conference hosted by RBC Capital Markets on Monday.

Profits will increase

A rapid increase in the Bank of Canada’s key rate has led to an increase in the net margin of financial institutions. This is the difference between the interest rate they pay on deposits and the interest rate they get on mortgages and other loans.

For the fiscal year ended October 31, National Bank’s net interest margin stood at 2.14%, compared to 2.11% in the previous year.

The bank’s net interest income rose 12% to $2.9 billion and net profits rose 14% to $1.3 billion.

The firm also benefited from increased loan volumes (+8%) and deposits (+4%).

A decidedly optimistic Laurent Ferreira expressed hope that the capping of interest rates expected in the middle of the year would not have a negative impact on the National Bank’s profitability.

You can still pay

So far, he said, customers with variable rate loans are still able to meet their payments.

“We are very active in opening a dialogue with them and making sure they can absorb the rate increase,” said Mr. Ferreira said.

“In general, when we look at the performance of our portfolio [de prêts] Also the affordability of our customers at higher prices is very good,” he added.