Canadian Banking - January 2007

SCOPE AND THEMES
What you need to know
Scope of the report
Abbreviations and terms
Terms
EXECUTIVE SUMMARY
Top trends and issues in the industry
Economic and financial overview
Mortgage and insurance markets
Credit and debit
Competitive trends
Canadian banking customers are loyal
Personal service is important
The consumer and online banking
Opportunities for organic growth
OVERVIEW OF THE CANADIAN BANKING SECTOR
 HISTORY
Figure 1: Distribution of deposit-taking institution branches in Canada, 2003
 DOMESTIC VS. FOREIGN, AND NEW COMPETITORS
Figure 2: Real value of services produced (VSP) by type of institution, 1997 and 2004
Figure 3: Market share by type of institution, Canada, 1997-2004
Figure 4: Market share of real value of services produced (vsp) by business line, Canada, 1997 to 20041
 INCOME FROM TRADITIONAL SOURCES
Figure 5: Financial institution income from traditional sources, 1995-2003
Domestic bank non-interest income results align with Canadian stock indexes
Figure 6: Non-interest income for Canadian financial institutions, 1996-2004
MARKET DRIVERS
 DEMOGRAPHIC MARKET DRIVERS
Figure 7: Components of Canadian population growth, July 2005-June 2006
 AGING
Figure 8: Median age of the Canadian population, 1921-2004
Figure 9: Population, median age and age distribution, Canada, 1946 to 2056 
International banking penetration—a comparison
Figure 10: Percentage of population with an account at a financial institution, by country, 2005
 ECONOMIC MARKET DRIVERS
Figure 11: Composite Economic Indexes, September 2005-September 2006
Effects of the U.S. economy on the Canadian financial sector
Figure 12: Selected interest rates, 2001-05
Figure 13: Canadian conventional one-, three- and five-year mortgage rates, 1996-2006
Canadian GDP
Figure 14: Canadian gross domestic product, annualized, quarter to quarter change, 2003-06
 NEW MORTGAGE LOAN PRODUCTS AVAILABLE IN CANADA
Figure 15: Chartered bank administered interest rate—prime rate, 1996-2006
Canadian GICs
 TECHNOLOGICAL MARKET DRIVERS
Finance, marketing and technology
Figure 16: Chronology of advances in Canadian banking, 1968-2005
The Internet and online banking
Figure 17: Percentage of adult Canadians using the Internet, 2005 
Figure 18: Concerns about online banking, 2005
Figure 19: Potential steps to increase trust and protect privacy, 2005
Figure 20: Reasons adult home Internet users go online, 2005
Figure 21: Characteristics of individuals using the Internet in Canada, 2005
 HOUSEHOLD STATISTICS
Household debt to service ratio
Figure 22: Household debt and assets as a percentage of disposable income, 1965-2005
Household savings
Figure 23: Household savings as a percentage of disposable income, 1960-2005
Housing prices
 IMMIGRATION
Figure 24: Percentage of visible minorities in metropolitan areas, 2001 and 2017(proj.)
Banks targeting new immigrants
Figure 25: Ranking of banking institutions by share of primary relationships for ethnic groups, 2005
India
China
 BANKS IN THE SUB-PRIME SECTOR
 LOW-COST ACCOUNTS
Figure 26: Designated ‘low-cost account’ features, 2006
 AUTOMATED BANKING MACHINES (ABMS)
Figure 27: Number of bank-owned ABMs in Canada, 1995-2005
Figure 28: ABM statistics, 2005
 REGULATORY ISSUES
Basel II accord
MARKET SIZE AND SEGMENTATION
Figure 29: Canadian market share of domestic assets, deposits, consumer credit and mortgages, by banking type. 2005
Figure 30: Market share of Canadian banking institutions as of Q4 2005
Figure 31: Canadian financial institution market share of total banking assets, by type of institution, 2005
 SUB-SECTORS OF CANADA’S FINANCE AND INSURANCE SECTOR
 CANADIAN FINANCIAL SECTOR QUICK FACTS AND STATISTICS
 THE CHARTERED BANKS
The ‘Big Six’
Figure 32: Canadian domestic banks by type of company, 2006
 FOREIGN BANKS OPERATING IN CANADA
 PROVINCIAL COOPERATIVE CREDIT ASSOCIATIONS
 TRUST COMPANIES
 LOAN COMPANIES
 REGULATORY ENVIRONMENT, FINANCIAL STANDARDS AND ASSOCIATIONS
Notable financial regulatory amendments
CDIC
OSFI
Insurance product networks
Mortgage insurance
 DOMESTIC MARKET SHARES
Trust companies
Market share for Registered Retirement Savings Plan assets
Figure 33: Financial institution market share for RRSP accounts, 2005
Mortgages and mortgage-backed securities
Figure 34: Total outstanding balances of residential mortgage credit by institution type, 2000-05
Consumer credit excluding mortgages
Figure 35: Graph: Market share for consumer credit excluding mortgages, by type of institution, 2005
COMPETITIVE LANDSCAPE
Figure 36: The Top 25 Boards Ranked by Canada Business Online-2006 (financial companies only)
Figure 37: Top Six Chartered Banks by Net Income, 2003-05
 CANADIAN BANKS ABROAD
Figure 38: Assets owned abroad by Canadian financial institutions, 1996-2004
 CHARTERED BANK MERGERS
 CANADIAN CHARTERED BANK MARKET SHARES
Figure 39: Canadian banks ranking by assets, 2005
Figure 40: Top six banks ranked by deposits/savings, 2005
 THE FINANCIAL CO-OPERATIVES, CREDIT UNIONS AND CAISSES POPULAIRES
Figure 41: Number of credit unions in Canada, 1987-2005
Figure 42: Canadian credit union ranking by revenue, year-end 2005
ADVERTISING AND PROMOTION
 TOP DIRECT MAILERS 2006
Figure 43: Top ten Canadian banking acquisition direct mailers, Q1–Q3 2006
Figure 44: Top ten Canadian banking portfolio direct mailers, Q1–Q3 2006
 NOTABLE BANKING DIRECT MAILERS 2006
Figure 45: Notable mailers of 2006
ING Direct
Figure 46: ING Direct Investment Savings Account acquisition mailing, September 2006
Figure 47: Royal Bank No Limit Account acquisition mailing, September 2006
Figure 48: Royal Bank No Limit Account acquisition mailing (continued), September 2006
Figure 49: President’s Choice Federal No Fee Bank Account retention/cross-sell mailing, October 2006
 TOP CREDIT CARD MAILERS
Figure 50: Top Canadian credit card acquisition mailers, July 2005 through September 2006
 NOTABLE CREDIT CARD MAILERS, 2006
Figure 51: Capital One Gold Mastercard, 2006
Figure 52: American Express Air Miles Card, 2006
 TELEVISION ADVERTISING
Figure 53: Bank of Montreal, 2006
Figure 54: Assurances Banque Nationale, 2006
Figure 55: BMO Bank of Montreal, 2006
Figure 56: CIBC bank, 2006
Figure 57: HSBC (corporate), 2006
Figure 58: Royal Bank of Canada, 2006
Figure 59: Scotiabank, 2006
Figure 60: TD Canada Trust Bank, 2006
THE CONSUMER
 SUMMARY
Canadian banking customers are loyal
How and where they do their banking
Why consumers choose a bank
Number of banking relationships
 MINTEL’S CANADIAN BANKING CONSUMER SURVEY
Type of banking institution preferred
Figure 61: Type of institution for primary banking relationship, December 2006
Figure 62: Type of institution for primary banking relationship, December 2006
Figure 63: Type of institution for primary banking relationship, December 2006
Figure 64: Type of institution for primary banking relationship, by province, December 2006
Primary influence in choice of bank
Figure 65: Primary influence in choice of bank, by gender, December 2006
Figure 66: Primary influence in choice of bank, by age, December 2006
Figure 67: Primary influence in choice of bank, by income, December 2006
Figure 68: Primary influence in choice of bank, by province, December 2006
Number of banking relationships
Figure 69: Number of bankig relationships, by gender, December 2006
Figure 70: Number of banking relationships, by age, December 2006
Figure 71: Number of bankig relationships, by income, December 2006
Type of accounts at primary bank
Figure 72: Type of accounts at primary bank, by gender, December 2006
Figure 73: Type of accounts at primary bank, by age, December 2006
Figure 74: Type of accounts at primary bank, by income, December 2006
Types of accounts at other institutions
Figure 75: Type of accounts at any financial services company other than primary institution, by gender, December 2006
Figure 76: Type of accounts at any financial services company other than primary institution, by age, December 2006
Figure 77: Type of accounts at any financial services company other than primary institution, by income, December 2006
Importance of banking services
Figure 78: Importance of banking services, overall, December 2006
Figure 79: Importance of banking services, males, December 2006
Figure 80: Importance of banking services, females, December 2006
Switching frequency
Figure 81: Frequency respondents have changed banks in last five years, by gender, December 2006
Figure 82: Frequency respondents have changed banks in last five years, by age, December 2006
Figure 83: Frequency respondents have changed banks in last five years, by income, December 2006
Why respondents would switch
Figure 84: Products/services that would potentially influence respondents to switch banks, by gender, December 2006
Figure 85: Products/services that would potentially influence respondents to switch banks, by age,
Figure 86: Products/services that would potentially influence respondents to switch banks, by income, December 2006
 OTHER CONSUMER SURVEYS
Age and finance
Figure 87: How young Canadians learn about savings and bank accounts, 2006
Figure 88: Average age for opening first bank account, 2006
Figure 89: Reason for opening first bank account, 2006
Financial Consumer Banking Preferences
Figure 90: Canadians’ primary methods of banking, 2005
Figure 91: Canadians’ primary means of bill payment, 2005
Payment method preferences
Figure 92: Preferred payment methods for consumers, 1998–2004
Figure 93: Estimated volume of transactions at point of sale, by payment method, 1997-2004
Figure 94: Consumer preferences for payment method by transaction value, 2005
FUTURE TRENDS
 BANK EARNINGS GROWTH LIKELY TO SLOW
Bank of Montreal Outlook
CIBC Outlook
Figure 95: CIBC Economic Outlook, 2005-07
CDIC Outlook
The Bank of Canada Outlook
National Bank of Canada Outlook
 FUTURE FINANCIAL INSTITUTION EXPANSION STRATEGIES AND CAPITAL USE
Demographic trends changing the future customer base
The importance of technological innovation
Figure 96: Potential steps to increase trust and protect privacy, 2005
Organic growth and expansion—the “booming” and the “struggling” provinces
Global economics in 2007
New sources of competition
APPENDIX: TRADE ASSOCIATIONS