Bank CEOs juggling careful spending with new consumer habits during COVID-19

TORONTO — The CEOs of Canada's big banks say the COVID-19 pandemic has pushed their companies to balance quickly adapting to new consumer habits with a careful approach to combating economic pressures.

Speaking Wednesday at Scotiabank's annual financial summit, which is being held virtually this year, executives said that they have spent recent months dealing with changes in the way their customers bank and the relief they receive from the federal government.

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Royal Bank of Canada chief executive Dave McKay says a lot of consumers are stashing cash they got from government COVID-19 relief programs because they are concerned about their financial situation and want to be conservative.

Others can't spend what they have because the restaurants, gyms and spas where they would typically spend it are closed or have restricted operations.

"There is still stimulus embedded in savings accounts that can get circulated through the economy that hasn't been spent yet," McKay said.

"That is good news. There is dry powder in the balance sheets."

Getting that cash out into the economy is no easy feat, the bank CEOs conceded.

They've been looking at how to do that at a time when many have moved their workforces home, temporarily closed several bank branches and begun bracing themselves for bad loans in future quarters.

To withstand the pressure, they have leaned on wealth management businesses and investments in technology that make banking from home easy.

At RBC, there is a lot of activity and expenses around mortgages and deposits, but McKay anticipates those costs to return to normal eventually.

He is intent on focusing capital on areas that will drive growth like hiring new advisers, but anticipates some cost cutting and will be keeping an eye on low interest rates and new government policies because he knows that will challenge consumers.

"We can't raise taxes that would impact capital investment in growth," he said.

"Long term, I would expect something like the HST/GST to go up to recoup some of that, but in the short-term we need to stimulate that spend and continue to encourage capital investment in the economy."

Meanwhile, Scotiabank CEO Brian Porter said the pandemic been a reminder that "good companies invest in bad times," but he is still trying to be disciplined.

When decision-makers at the bank sit down to mull the economic situation, he said they are prioritizing regulatory issues and customer experience.

"A coupe of the business line expenses have been deferred, but these are things I would define as important or nice to have, but we don't need them tomorrow in terms of running the bank," Porter said.

In recent years, Scotiabank has invested heavily in digital offerings, but when asked if the benefits of offering such services outweigh the costs during the pandemic, Porter said, "there are no sacred cows at the bank" and hinted that there is room for improvement.

Bank of Montreal chief executive Darryl White said he is making investment decisions with one thing in mind: strategy.

"Does it further an existing strategy? Does it get it deeper into a customer relationship?" he said are top things he asks himself.

While he expects revenues will be harder to grow with low interest rates, he also believes there are opportunities in helping customers bank however they like.

"We don’t take the view that we should force the consumer into any one channel," White said.

That is why he is looking at expanding hours at the branches that are open and ensuring that customers can bank online if they want to, but have in-person options too.

And he expects some positive news from those customers who haven't been spending lately.

"I don't know when, but it will release when people see the light at the end of the tunnel."

This report by The Canadian Press was first published Sept. 9, 2020.

Companies in this story: (TSX: BNS, TSX: RY, TSX: BMO)

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