Wealth management was a source of strength for the big Canadian banks in 2021, and looks likely to help drive growth again in 2022, Fitch Ratings reports.

In a new report, the rating agency said the Big Six banks enjoyed a year of strong earnings in fiscal 2021, which included both “unusually low credit costs” and robust capital markets activity, along with high liquidity and capital levels.

Overall, revenues rose 4.5% year over year and adjusted net income was up by 50% on average from the prior year, and up 25% from pre-pandemic levels, boosted by low credit loss provisions.

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“Full-year Canadian retail and commercial banking performance in revenues and earnings exceeded pre-pandemic levels across all institutions for fiscal 2021, notwithstanding competitive mortgage pricing, lower margins, a slow rebound in credit card balances and higher liquidity,” Fitch said in the report.

All of the banks’ wealth management divisions produced strong revenue growth in fiscal 2021, with revenues in the segment up 12% to 21% year over year.

“In general, higher revenues benefited from higher fees generated via increased assets under administration (AUA) and assets under management (AUM), in turn reflecting market appreciation, higher client fee-based assets and net additions, thereby offsetting competitive pressures on fees,” Fitch said in its report.

The banks’ retail and institutional businesses were both strong in 2021, “with high customer activity driving increased mutual fund fees and brokerage/retail trading revenues,” it said.

Looking ahead to the coming year, Fitch said that wealth management could remain a source of strength for the big banks, particularly if markets hold up too.

Outside of wealth management, results from the banks’ other capital markets businesses were mixed, the report noted.

“… banks generally benefited from strong M&A advisory fees but experienced declining aggregate trading revenues for the fourth consecutive quarter, reflecting progressive normalization of market conditions and tighter credit spreads throughout the year,” it said.

For the year ahead, the firm expects continued strength in M&A and other advisory businesses, while underlying economic growth supports consumer and commercial credit, and rising interest rates will boost margins.

“Longer-term challenges for banks include elevated private- and public-sector leverage and a more vulnerable housing market,” it noted.