NBC says rising rates will lead to mortgage market “normalization”
In our view, inflation should continue to decelerate and interest rates should normalize this fall to just over 3%.” The bank’s mortgage volumes were up 8% year-over-year, but Ferreira noted that, “Given the rising interest rate environment, we anticipate the demand for real estate secured lending to continue to normalize back to pre-COVID levels.” “Several factors continue to support the Canadian housing market, including strong immigration and unemployment at historic lows,” he added. “On a total Bank basis, [net interest income] was up 16% year-over-year, and our net interest margin, excluding trading, was up 9 basis points year-over-year.” Asked why NBC outperformed its other big-bank peers this quarter on revenue and earnings, Ferreira said, aside from a “disciplined approach, …one of the big differences that you should be aware of is we are focused on Canada. I think that could be a big delta in the results that you’re seeing so far.” William Bonnell, Executive Vice-President, Risk Management, commented on why the bank has confidence in Quebec mortgage consumers and their increased capacity to absorb higher interest rates and cost of living compared to consumers in the rest of Canada (keeping in mind half of the bank’s portfolio is originated in Quebec): “One we’ve talked about a lot in the last 10 or 15 quarters is that Quebec households have got higher dual income households because of the very high participation rate of women in the workforce in Quebec.
