Canada’s banks are expected to generate almost $100 billion in pre-tax profits this year, according to a new report form the Conference Board of Canada.
The report, Canadian Industrial Outlook: Banking, forecasts banking industry profits will rise to more than $95 billion (pre-tax) this year.
By comparison, pre-tax profits in Canada’s insurance industry are forecast to reach $13.3 billion in 2018, down 9.6% from last year.
The banking industry is expected to grow by an average of 2.6% annually through 2022, with the insurance industry growing by an average 1.7% over the same period.
The report forecasts strong growth for banking despite increased competition from financial technology (fintech) firms and weakening demand for mortgages and other consumer debt as interest rates continue to rise.
“The impact of financial technology firms on the industry is growing, and to date this has been primarily beneficial to the industry. Productivity continues to increase considerably and has been a key driver behind its successful financial performance,” says Michael Burt, director, industrial economic trends, with the Conference Board, in statement.
Canada’s insurance industry is facing similar challenges to the banks, from shifting economic conditions and technology, according to the report. “Technological advances are also impacting Canada’s insurance industry, which is changing the way they do business,” said Burt.
“In the life insurance segment, insurers are trying to attract enough new enrollees to offset the costs caused by Canada’s aging population, although this will prove difficult,” the Conference Board says in a news release.
It also sees weaker demand for mortgages limiting the demand for home insurance.
“On a positive note, insurers do stand to benefit from rising interest rates as they will earn higher returns on their investments,” the Conference Board says.