Analyst advises banks to focus more on loans, including mortgages

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MacBeth sees the move by banks into wealth management, which started in the 1980s with the acquisition of independent brokerage firms such as Dominion Securities, as a turning point in the Canadian financial services industry, that up until then had kept the four pillars relatively separate.

“The banks didn’t use to be in the brokerage industry,” says MacBeth. “When I started in the industry [1978] they weren’t allowed to be but then in 1987 they started buying firms such as Pit field, MacKay, Ross; after that you couldn’t avoid working for the banks at some point.”

The problem with this scenario is that should the “housing bubble” burst, the banks will be ones most affected by the fallout. First, similar to what happened in the U.S., they’ll be left holding paper on properties severely under water. Second, the big advisor networks of those banks will suffer considerable damage to their assets under management as clients sell assets to shore up their real estate.

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  • Mortgage Guy Geoff on 2015-03-24 12:01:43 PM

    Once again this guy is promoting a thinly vailed self-serving opinion that we are supposed to believe is expert and I guess impartial? He seems to be suggesting that banks should focus more on the mortgage and loan business and less on the brokerage business, a business in which he competes. Interesting....

    To state the obvious....consider the source and what their self-interest is likely to be before deciding whether their opinion makes sense.

  • HILBOJ2 on 2015-03-24 2:37:15 PM

    95% of bank net income/profits is not sourced from Secured Lending or even CC. He's not even close.
    Having a correct understanding of bank balance sheets and income statements, he would arrive at a different ratio. I recommend he follow his colleague's lead and obtain a CFA. Then he would understand the importance of correct data when deriving predictions.
    As a portfolio manager I would also like to hear disclosures re: his his personal or corp short positions with REIT ETFs. Surely if he predicts 50% decline in Canadian real estate he's putting his money, and his client's, where his mouth is.

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