Briefly:

(February 27, 2004) Royal Bank is on track for another banner year, reporting first quarter net income of $793 million, up 3% from Q1 of 2003. This increase comes despite a drop of 3% in total revenues and another $240 million wiped out by the strong Canadian dollar.

“We benefited this quarter from improved credit quality and our business diversification which resulted in higher brokerage, underwriting and mutual fund revenues as equity markets strengthened,” said Gordon M. Nixon, the bank’s president and CEO.

The bank also announced it was raising its quarterly dividend for common shares by 6 cents to 52 cents. Preferred shares also got a dividend boost and the bank is redeeming three subordinated debentures due in 2009.

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Life insurance applications down in 2003

(February 27, 2004) The number of applications for life insurance in North America dropped by.8% on a year-over-year basis in 2003, according to a report from MIB Group.

The decline was steepest in the U.S., where applications dropped by 4.1%. Canadian applications dropped by 1.4% compared to 2002, with the 60+ demographic outperforming others, with growth of 6.8%.

“Despite a relatively flat performance in 2003, Canadian life insurance application activity, as measured by per cent share of the total North American MIB Life Index, has increased in each of the last four years consecutively,” the report said.

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Fixed income market sees healthy growth

(February 26, 2004) Canada’s fixed income market showed continuing growth in the fourth quarter of 2003, as bond issuance and trading increased.

The federal government issued 34 new bonds in the three months ending December 31, 2003, worth $16.3 billion, a 20% rise from the same period in 2002. Federal bond trading increased 17% while real return bond trading climbed 7%.

The provinces issued 69 new bonds in Q4 worth $8.2 billion, a 119% jump from a year earlier.

Corporate debt issuance totalled $14.7 billion, up 36% from 2002. However, corporate bond trading slumped 11%. The financial and real estate sectors were the most active issuers. RBC and Scotiabank each raised $1 billion in the two largest issues.

Trading in treasury bills and money market instruments rose 18%.

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TD, CIBC report profits topping $600 million

(February 26, 2004) Two of Canada’s big banks have reported sharply higher first-quarter profits. TD Bank said it earned $603 million in the three months ending January 31, 2004 while CIBC took in $609 million.

TD’s profits were up an impressive 74% from the same period last year, thanks to increased revenues and better than expected loan losses.

“This quarter showed that we have three strong businesses all successfully executing on their strategies,” said TD CEO Edmund Clark.

At CIBC, profits were up 37% as the bank “delivered another quarter of strong results,” said president John Hunkin. “We continued to make excellent progress in our four key business strategies, and remained focused on building a model for sustained, long-term growth.”

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C.D. Howe calls for quarter-point rate cut

(February 26, 2004) A panel of economists and academics says the Bank of Canada should lower its benchmark overnight lending rate by 25 basis points to 2.25%. The central bank makes its next interest rate announcement on Tuesday, March 2.

The C.D. Howe Institute’s Monetary Policy Council was set up to provide an independent assessment of the Bank of Canada’s interest rate moves.

Panel members favouring a rate cut cited evidence that domestic demand in Canada continues to grow slowly, and that inflation remains under control.

Three of the panel’s nine members said the central bank should stand pat, noting that a strong U.S. economy is supporting Canadian growth.

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Worldsource buys Trowbridge

(February 25, 2004) Worldsource Wealth Management has announced the purchase of the Trowbridge Financial Network, moving Worldsource into the insurance agency business.

A press release issued by Worldsource describes Trowbridge as “one of Canada’s fastest growing Managing General Agencies, providing service to over 400 agents across Canada through 10 major insurance carriers in Canada.”

Worldsource says Robert E. L. Trowbridge will stay on with the firm he founded in 1997, where he “will continue to provide direction.”

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Mackenzie offers fourth equity-linked note

(February 25, 2004) Mackenzie Financial has launched its fourth CIBC FULPAY Mackenzie Funds-Linked Deposit Notes, which guarantee the principal while offering exposure to positive moves on the stock market.

“With Series 4, investors maintain peace of mind knowing that their principal is protected, but enjoy the added benefit of enhanced diversification and greater upside potential,” said David Feather, president of Mackenzie Financial Services Inc.

The notes are available through brokers and financial planners for a limited time, starting today until April 2, 2004.

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BMO posts higher Q1 profit

(February 24, 2004) The Bank of Montreal is reporting higher profits for the quarter ending January 31, 2004, raking in $532 million — an earnings gain of 34% from a year earlier. Earnings per share hit $1, up from 75 cents in 2003.

“Although net interest margin is under pressure due to low interest rates and the competitive environment, we are continuing to benefit from better credit performance and our focus on improving productivity,” said Tony Comper, chair and CEO of BMO Financial Group. BMO also announced today that it would split the roles of chair and CEO, the last of the big banks to make the change.

Net income was helped along by $18 million of various one-time gains, but excluding this, income was still higher by $115 million. The bank also announced it will boost its quarterly dividend by 14%, to 40 cents per share.

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BMO agrees to environmental risk disclosure

(February 24, 2004) Bank of Montreal shareholders have overwhelmingly approved a resolution requiring the bank to disclose how it evaluates and manages environmental risk.

The resolution — approved by BMO’s board of directors — calls on the bank to report on the criteria it uses to ensure that it provides credit only to companies that meet environmental standards.

“We’re truly delighted that the Bank of Montreal is committed to implementing a progressive measurement and reporting system on environmental practices,” said Deb Abbey, president of Real Assets, which sponsored the resolution along with co-filers Meritas Mutual Funds and Ethical Funds.

“The banks are a proxy for all business in Canada through their lending and underwriting,” Abbey added. “When they set high standards for social and environmental performance, they raise the bar for everyone.”

A similar resolution filed by Real Assets with Toronto Dominion Bank did not make it to the ballot.

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Hancock votes in favour of merger

(February 24, 2004) Manulife Financial has cleared another hurdle toward its cross-border merger with John Hancock Financial, as shareholders of the U.S. firm voted in favour of the deal.

“Sometime in April, I expect we will be completing the largest cross-border transaction in Canadian history,” said Dominic D’Alessandro, president and CEO of Manulife. “We look forward to completing our transaction and moving forward with our integration plans.”

The deal still needs regulatory approval from the Office of the Superintendent of Financial Institutions and the Massachusetts Division of Insurance. The merged company will be the second largest insurer in North America.

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OMERS shuffles assets

(February 23, 2004) The Ontario Municipal Employees Retirement System (OMERS) has announced it is shifting its asset allocation to accommodate the expected increase in retirements. OMERS will reduce its holdings in publicly traded stocks and bonds from 80% to 60% over the next four to five years.

“Alternative investments” such as private equity, infrastructure and real estate will make up a larger portion of its holdings, moving from 18% to 35%.

“Alternative non-marketable assets, as a function of our asset mix policy, should deliver strong returns over the long haul,” said OMERS CEO Paul Haggis. They should generate solid cash flow, creating an annuity stream to pay benefits that will rise from $1.4 billion a year today to as much as $7 billion annually by 2025.”

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(02/23/04)