The RBC Royal Bank of Canada logo is seen in Halifax on Tuesday, April 2, 2019. THE CANADIAN PRESS/Andrew Vaughan

The RBC Royal Bank of Canada logo is seen in Halifax on Tuesday, April 2, 2019. THE CANADIAN PRESS/Andrew Vaughan

RBC CEO wants policy-makers to tackle lack of housing supply pushing up prices

New mortgage stress rules come into effect on June 1

Royal Bank of Canada’s chief executive says he supports the federal government’s efforts to cool the country’s real estate market, but feels it’s time to address the lack of housing.

“We support recent actions taken by regulators to adjust mortgage stress tests to take some pressure off the demand side of the equation, but we encourage policy-makers to also address the problems of limited supply, which are exacerbating house price inflation,” Dave McKay told analysts on a Thursday call.

The new mortgage stress rules he was referring to come into effect on June 1. They will set the qualifying rate on uninsured mortgages at either two percentage points above the contract rate, or 5.25 per cent, whichever is greater.

They were announced by the government earlier this year in hopes of removing some of the heat from popular markets like Toronto and Vancouver and suburban and rural regions that generated plenty of sales as people working from home during the pandemic looked further afield for housing.

Prior to the government unveiling its plan, McKay called for the qualifying rate used for mortgages to be increased because he felt it would put pressure on people overreaching to handle a larger home with a low interest rate and take some buyers that require a large down payment out of the marketplace.

While McKay was calling for such measures, RBC’s Canadian banking segment added more than $55 billion in mortgages and its number of clients in the country with more than a transaction account rose to 65 per cent.

Many had a mortgage, credit card or mutual fund with the bank and such relationships helped boost the bank’s retention rates and mortgage profitability, he said.

In recent months, the bank has also directed much of its attention towards putting aside massive amounts of money to prepare for customers potentially defaulting on loans.

RBC reversed $96 million of its provisions for credit losses in its latest quarter compared with the $2.83 billion it set aside in the same quarter last year at the start of the pandemic.

While the bank has eased up on how much it added to those reserves in the last two quarters, chief risk officer Graeme Hepworth said he expects delinquencies and impairments to increase in the fourth quarter and into the first half of 2022 as government relief programs wind down.

“However, we don’t expect them to be as acute as we initially expected at the onset of the pandemic,” he said.

McKay and Hepworth’s comments came as RBC topped expectations and reported its second-quarter profit more than doubled compared with a year ago.

The bank earned nearly $4.02 billion or $2.76 per diluted share for the quarter ended April 30, up from a profit of $1.48 billion or $1.00 per diluted share a year earlier.

Revenue totalled $11.62 billion, up from $10.33 billion in the same quarter last year.

RBC said its adjusted earnings per diluted share for the quarter amounted to $2.79, up from $1.03 a year ago.

Analysts on average had expected an adjusted profit of $2.48 per share, according to financial data firm Refinitiv.

READ MORE: Canadian housing prices fastest rising in the world

Tara Deschamps, The Canadian Press


Like us on Facebook and follow us on Twitter.

Housing

Just Posted

(File photo)
Crime report: Crooks busy pilfering bikes throughout Parksville Qualicum Beach area

Thefts among 295 complaints Oceanside RCMP deal with in one-week period

The Arrowsmith Search and Rescue logo on the back of a service vehicle. (Mandy Moraes photo)
Parksville and Qualicum Beach provide letters of support for Arrowsmith Search and Rescue

ASAR asks for increase in funding, one-time capital grant and for RDN to buy out current facility

The proposed running track upgrade at Ballenas Secondary is now on course. (PQB News file photo)
RDN: Parksville track upgrade project gains some traction

Staff recommends board approve $204,000 funding

The total earnings of Town of Qualicum Beach council and mayor amounted to $186,649 in 2020, including expenses. (Town of Qualicum Beach photo)
Nine Qualicum Beach town employees earned more than $100K in 2020

Mayor and council received earnings totalling $186,649

(PQB News file photo)
Fireworks report highlights enforcement challenges for Regional District of Nanaimo

Director: ‘I just think it’s wasting everybody’s time’

Canadian Prime Minister Justin Trudeau participates in a plenary session at the G7 Summit in Carbis Bay, England on Friday June 11, 2021. THE CANADIAN PRESS/Adrian Wyld
Canada donating 13M surplus COVID-19 vaccine doses to poor countries

Trudeau says the government will pay for 87 million shots to be distributed to poor countries

Cruise ship passengers arrive at Juneau, Alaska in 2018. Cruise lines have begun booking passengers for trips from Seattle to Alaska as early as this July, bypassing B.C. ports that are not allowed to have visitors until March 2022 under a Canadian COVID-19 restrictions. (Michael Penn/Juneau Empire)
B.C. doesn’t depend on U.S. law to attract cruise ships, Horgan says

Provinces to get update next week on Canada’s border closure

This undated photo provided by Girl Scouts of New Mexico Trails shows a scout donating cookies to firefighters in Rio Rancho, New Mexico, as part of the Hometown Heroes program. As the coronavirus pandemic wore into the spring selling season, many Girl Scout troops nixed their traditional cookie booths for safety reasons. That resulted in millions of boxes of unsold cookies. (Girl Scouts of New Mexico Trails via AP)
Thinner Mints: Girl Scouts have millions of unsold cookies

Since majority of cookies are sold in-person, pandemic made the shortfall expected

In this artist’s sketch, Nathaniel Veltman makes a video court appearance in London, Ont., on June 10, 2021 as Justice of the Peace Robert Seneshen (top left) and lawyer Alayna Jay look on. THE CANADIAN PRESS/Alexandra Newbould
Terror charges laid against London attack suspect

Crown says Nathaniel Veltman’s four counts of first-degree murder constitute an act of terrorism

Premier John Horgan speaks as provincial health officer Dr. Bonnie Henry, right, and health minister Adrian Dix look on during a press conference to update on the province's fall pandemic preparedness plan during a press conference from the press theatre at Legislature in Victoria, Wednesday, Sept. 9, 2020. THE CANADIAN PRESS/Chad Hipolito
B.C. officials to provide details on Step 2 of COVID reopening plan Monday

Step 2 could allow for larger gatherings and a resumption of recreational travel

Indigenous Services Minister Marc Miller is seen during a news conference, Wednesday May 19, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Indigenous child-welfare battle heads to court despite calls for Ottawa to drop cases

Feds are poised to argue against two Canadian Human Rights Tribunal rulings

The Great Ogopogo Bathtub Race has been held in Summerland as a fundraising event. Do you know which Canadian city introduced this sport? (Black Press file photo)
QUIZ: A summer’s day at the water

How much do you know about boats, lakes and water?

Two-year-old Ivy McLeod laughs while playing with Lucky the puppy outside their Chilliwack home on Thursday, June 10, 2021. (Jenna Hauck/ Chilliwack Progress)
VIDEO: B.C. family finds ‘perfect’ puppy with limb difference for 2-year-old Ivy

Ivy has special bond with Lucky the puppy who was also born with limb difference

Most Read