The RBC Royal Bank of Canada logo is seen in Halifax on Tuesday, April 2, 2019. THE CANADIAN PRESS/Andrew Vaughan

The RBC Royal Bank of Canada logo is seen in Halifax on Tuesday, April 2, 2019. THE CANADIAN PRESS/Andrew Vaughan

RBC CEO wants policy-makers to tackle lack of housing supply pushing up prices

New mortgage stress rules come into effect on June 1

Royal Bank of Canada’s chief executive says he supports the federal government’s efforts to cool the country’s real estate market, but feels it’s time to address the lack of housing.

“We support recent actions taken by regulators to adjust mortgage stress tests to take some pressure off the demand side of the equation, but we encourage policy-makers to also address the problems of limited supply, which are exacerbating house price inflation,” Dave McKay told analysts on a Thursday call.

The new mortgage stress rules he was referring to come into effect on June 1. They will set the qualifying rate on uninsured mortgages at either two percentage points above the contract rate, or 5.25 per cent, whichever is greater.

They were announced by the government earlier this year in hopes of removing some of the heat from popular markets like Toronto and Vancouver and suburban and rural regions that generated plenty of sales as people working from home during the pandemic looked further afield for housing.

Prior to the government unveiling its plan, McKay called for the qualifying rate used for mortgages to be increased because he felt it would put pressure on people overreaching to handle a larger home with a low interest rate and take some buyers that require a large down payment out of the marketplace.

While McKay was calling for such measures, RBC’s Canadian banking segment added more than $55 billion in mortgages and its number of clients in the country with more than a transaction account rose to 65 per cent.

Many had a mortgage, credit card or mutual fund with the bank and such relationships helped boost the bank’s retention rates and mortgage profitability, he said.

In recent months, the bank has also directed much of its attention towards putting aside massive amounts of money to prepare for customers potentially defaulting on loans.

RBC reversed $96 million of its provisions for credit losses in its latest quarter compared with the $2.83 billion it set aside in the same quarter last year at the start of the pandemic.

While the bank has eased up on how much it added to those reserves in the last two quarters, chief risk officer Graeme Hepworth said he expects delinquencies and impairments to increase in the fourth quarter and into the first half of 2022 as government relief programs wind down.

“However, we don’t expect them to be as acute as we initially expected at the onset of the pandemic,” he said.

McKay and Hepworth’s comments came as RBC topped expectations and reported its second-quarter profit more than doubled compared with a year ago.

The bank earned nearly $4.02 billion or $2.76 per diluted share for the quarter ended April 30, up from a profit of $1.48 billion or $1.00 per diluted share a year earlier.

Revenue totalled $11.62 billion, up from $10.33 billion in the same quarter last year.

RBC said its adjusted earnings per diluted share for the quarter amounted to $2.79, up from $1.03 a year ago.

Analysts on average had expected an adjusted profit of $2.48 per share, according to financial data firm Refinitiv.

READ MORE: Canadian housing prices fastest rising in the world

Tara Deschamps, The Canadian Press


Like us on Facebook and follow us on Twitter.

Housing

Just Posted

The ‘official’ opening of 2nd Edition Coworking in downtown Fernie, a project five years in the making by the Fernie Chamber of Commerce. Left to right: Executive Director of the Fernie Chamber Brad Parsell, incoming President of the Fernie Chamber Norm Fraser, outgoing President of the Fernie Chamber Anita Palmer, and Mayor of Fernie Ange Qualizza. (Scott Tibballs / The Free Press)
Fernie Chamber cuts the ribbon on 2nd Edition

The new coworking space in Fernie is now ‘officially’ open, but has been operating since early 2021

Residents line up outside the Vernon Recreation Complex for their COVID-19 vaccine Saturday, June 5. (Jennifer Smith - Morning Star)
No appointments necessary for first dose COVID-19 vaccine: Interior Health

People can just show up at clinics, register on the spot and get the shot

Sparwood Mayor David Wilks with the new AED SaveStation installed at the Sparwood Leisure Centre. (Contributed by District of Sparwood)
Sparwood installs public AED

The SaveStation was installed thanks to a grant from CP Rail

Provincial Health Officer Dr. Bonnie Henry on Thursday, June 10, mentioned Grand Forks among two other COVID “hot spots” in B.C. Photo: Screenshot - YouTube COVID-19 BC Update, June 10, 2021
PHO Henry says West Kootenay city is a COVID ‘hot spot’ in B.C.

There are 11 cases of COVID-19 in the Grand Forks local health area, according the BC CDC

(File)
“Gift card scam,” and “grandparent scam” are on the rise, Cranbrook RCMP say

Folks are falling for these scams: “No Government agency or reputable company will ever ask anyone to pay with gift cards in lieu of their fines”

t
How to tell if a call from ‘CRA’ is legitimate or a scam

Expert says it’s important to verify you really are dealing with the CRA before you give out any info

Unofficial holidays: Here’s what people are celebrating for the week of June 13 to 19

Flag Day, Garbage Man Day, International Panic Day all coming up this week

British Columbia-Yukon Community News Association’s 2021 Ma Murray Awards were handed out during a virtual ceremony on Friday, June 10. (Screen grab)
Black Press Media winners take gold at B.C. and Yukon journalism awards

Publications received nods in dozens of categories

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Prime Minister Justin Trudeau greets campers while visiting McDougall, Ont. on Thursday, July 19, 2018. THE CANADIAN PRESS/Frank Gunn
71% of B.C. men say they’d prefer to go camping with Trudeau: survey

Most British Columbians with plans to go camping outdoors say they’d prefer to go with Trudeau or Shania Twain

Members of the Department of Fisheries and Oceans’ Marine Mammal Response Program rescued an adult humpback what that was entangled in commercial fishing gear in the waters off of Entrance Island on Thursday, June 10. (Photo courtesy Marine Mammal Response Program)
Rescuers free humpback ‘anchored’ down by prawn traps off Vancouver Island

Department of Fisheries and Oceans responders spend hours untangling whale

Chilliwack cocaine trafficker Clayton Eheler seen with a tiger somewhere in Asia in 2014. Eheler was sentenced to nine years jail in 2018, but was released on bail in October 2020 pending his appeal of conviction.(Facebook)
Director of civil forfeiture seeks $140,000 from Fraser Valley drug dealer’s father-in-law

Clayton Eheler’s father-in-law Ray Morrissey caught with money in Fort St. John by B.C.’s gang unit

A Comox Valley shellfish operator pleaded guilty and was fined $10,000 in provincial court in Courtenay earlier this year. Record file photo
B.C. clam harvester fined $10,000 for Fisheries Act violations

Charges against three others were stayed in Courtenay Provincial Court

Frank Phillips receives a visit from his wife Rena at Nanaimo Seniors Village on their 61st wedding anniversary, March 31, 2020. Social visits have been allowed since COVID-19 vaccination has been offered in all care homes. (Nanaimo News Bulletin)
B.C. prepares mandatory vaccination for senior care homes

180 more cases of COVID-19 in B.C. Friday, one more death

Most Read