As interest rates increase, banks will have the leverage to increase interest income
Los Angeles, CA (PRWEB) February 22, 2013
The Commercial Banking industry has experienced a slight slowdown in growth in the five years to 2013. Low interest rates have restricted the interest spread banks are able to charge on their personal and business lending portfolios. Furthermore, the financial recession that started in late 2008 caused demand from consumers and businesses to decline. However, according to IBISWorld industry analyst Even Jose, “On the whole, Canadian commercial banks fared much better than their US counterparts because they were not directly hit by the subprime crisis and were in a much better financial position to weather the storm.” As a result, industry revenue is expected to increase at an annualized rate of 2.2% to $72.8 billion in the five years to 2013. Steady demand from businesses and a recovery in personal lending is expected to boost revenue by 5.2% in 2013.
Uncertainty in Europe and the United States has kept commercial banks cautious, and stagnating, low interest rates have hindered revenue growth. Consequently, the level of competition between banks has increased steadily. Over the past five years, the Commercial Banking industry's major players, like Royal Bank of Canada and Toronto-Dominion Bank, have been becoming more active in acquiring consumer loan portfolios and smaller commercial banks to grow their market share. This activity is expected to result in a steady decline in the number of commercial banks. Additionally, commercial banks have started to form partnerships with credit card companies to offer customers additional access to rewards and promotions in an effort to increase deposits. “Banks have also been rapidly developing their telephone and internet banking platforms to increase consumer convenience and lower labour expenses,” says Jose. In the five years to 2018, IBISWorld expects banks to continue gather consumer information and tailor their products and services to consumer expectations.
In 2015, interest rates are projected to finally increase, which will give banks the leverage they need to widen interest spreads and increase interest income. Additionally, consumer demand for personal lending products will rise as the economy makes a full recovery. Improvements in the housing sector will increase wealth and make consumers more willing to borrow from banks. Consequently, industry revenue is forecast to increase strongly over the next five years. However, going forward, commercial banks will be required to comply with several new regulations that will likely put pressure on profit margins and revenue growth. For more information, visit IBISWorld’s Commercial Banking in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry provides financial services to retail and business clients in the form of commercial, industrial and consumer loans. Banks also accept deposits from customers, which are used as a source of funding for the loans. Banks in this industry include those that are regulated by the Office of the Superintendent of Financial Institutions.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US and Canadian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.ca or call 1-800-330-3772.