Bank profits to drive 2011 expansion

Coming out of the recession, Canada’s banking sector looks better than many of its global peers. Tough regulation ensured that the banks steered clear of the leverage minefield that sank some foreign competitors and 2010 profits have topped records set in 2007.

This presents the sector with unprecedented opportunities for growth and expansion, according to a report from PricewaterhouseCoopers. Investors and competitors alike should expect the banks to be more aggressive in 2011.

On the domestic front, the Big Six banks have focused on growing their wealth management businesses, but the number of companies available for consolidation has dwindled.

This is driving them to explore the same high-margin market segment in foreign jurisdictions. Diane Kazarian, national leader of the banking and capital markets practice at PwC, says that a recent survey of banking and capital markets CEOs found 61% saw the emerging markets will be more important than developed markets to their organization’s future.

One of the biggest hurdles facing Canadian banks in such an expansion is the regulatory patchwork they could face as they enter various markets.

“There are opportunities for those who can anticipate how business will change and creatively search for value,” says John MacKinlay, partner and financial services advisory leader for PwC. “The most successful banks are likely to be those that can make the most of their principal competitive strengths and focus on innovation to drive further growth.”