By Tom Bradley
RBC’s announcement that it’s making some adjustments to its fee schedule has caused quite a stir (employee pricing?). I’ll let the media tell the story (No Stone Left Unturned as RBC Hikes Fees), but there is one piece of context that may add to the conversation.
On its Canadian retail banking division, TD has a return on equity (ROE) of 42% (yes, four two). This compares to their commercial banking at 13% and U.S. retail at 8.5%. Clearly, retail banking in Canada is hugely profitable.
I picked TD because they report this number, but I’m confident the other Canadian banks make similar profits from their retail customers. The 42% relates to overall ROEs for the banks of 15-20%.
The media is sometimes unfair when taking shots at corporations with huge profits, but in this case, there is some meat behind the beef. The Canadian banking oligopoly has higher ROEs than any others in the world and individual Canadians are the reason. Pat yourself on the back.