Dan Werner: Generally, the Canadian banks had a pretty good first quarter. Canadian personal/commercial banking showed solid organic growth for all the banks. The international businesses, both in Latin America for Scotia as well as the U.S. businesses for TD and BMO, did very well, especially for BMO because of the GE Finance acquisition. But what was a tailwind a year ago in capital markets has become a headwind, as most of the energy exposures that these banks have are generally located in the capital markets segment. We're seeing much higher provisions and increasing gross impaired loans, and I think we're going to still see headwinds for much of the rest of this year and probably into next year for most of these banks. Will it impair their overall earnings? Possibly, but I think it depends upon how much gross impaired gets added on between now and then.
In terms of the dividends, we had four of the six increase their dividends this quarter. All of the banks have a dividend yield of greater than 4%. For the safety of the dividend, I don't have concerns at this point. Looking at our oil exposures for the Canadians, on a relative basis and on a worst-case scenario, they still would earn their way through a significant downturn in oil or significant credit impairments in the energy sector.
RBC, while it had good personal/commercial lending growth, did see some struggles with their insurance segment, which saw higher claims. But I think the big story for Royal and for all the Canadian banks was that its capital markets business and its wholesale banking business saw some struggles as they raised provisions due to higher energy credit issues.
BMO had a good quarter, largely due to the improvement in its U.S. segment, and [there are] a couple of reasons for that. First, they had incorporated their acquisition of General Electric’s Transportation Finance business, which brought in about $9 billion in loans. Also, the Federal Reserve move back in December helped their margin for the U.S. operations. And with all the Canadian banks, they saw pretty solid organic growth in Canada, in that mid-single-digit range. Just like everybody else, it was countered by the provisions in the capital markets segment. But the story for BMO was the incorporation of GE Transportation, and that's what led to the improvement.
For TD, good organic growth from Canada again; good organic U.S. growth as well. Again, the story is the improvement in margin with the Fed move back in December. Also, TD is much less exposed to wholesale banking markets and much less exposed to energy. I like this name for those facts, because the U.S. is projected to be a stronger economy than Canada, and its exposure to energy is much less than the other Canadians.
CIBC is the fifth largest in the top five in terms of size. It did have good organic growth on the personal/commercial side. The story with CIBC is that I'm a little bit worried about the energy exposure as it is. Based on our calculations, it has the most potential exposure to energy and potential energy losses. But overall, it had a good quarter and it's hard to argue with the results that they had.
Scotia had good international growth. They had mid-teen growth in its international business on its balance sheet, primarily from Latin America, which has been the story for Scotia for quite some time. Personal/commercial in Canada was good and solid, much like the other Canadian banks. But I think part of the headwind for Scotia is its energy exposure. It took a much larger provision than what we were expecting. It was about double what it was last quarter, and we would expect it to almost double again by the time things are through or they work through the credit portfolio, probably about a year from now.
The story for National for this quarter is that they took a charge on their Maple Financial Group holding, largely due to German regulatory issues and some of the tax years from 2006 to 2010. They wrote that holding down to zero, which was the reason for the big charge. If they didn't have to take that big charge, they probably would have been up a few percentage points on a year-to-year basis. Again, really strong growth on the personal/commercial side, the strongest of any of the six banks in the low double-digits. And I would look for them to bounce back on the personal/commercial side. But again, like with all the Canadians, I'm a little bit wary of the energy exposure with National.
