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

This parking on the east side of Martin Street will be removed permanently Monday morning (June 21, 2021) to put in the Lake to Lake bike lane. (City of Penticton)
Parking removed permanently to make way for bike lane in downtown Penticton

Work begins Monday morning to replace parking spots with bike lane on Martin Street

Jaimee Peters photo of a Willow Midwives helping with a birth. Willow closed its doors March 31 because of a shortage of midwives. (Contributed)
South Okanagan’s only midwifery to re-open this summer

Willow Community Midwives was forced to close because of a shortage of midwives

Gord Portman getting ready for the Father’s Day dunk tank fundraiser for Discovery House. So far Portman has raised $3,000. (Facebook)
Penticton man takes the plunge for recovery house that helped save his life

Gord Portman said Discovery House and Pathways have been everything in his 1 year sobriety

(File photo)
Supreme Court Justice rules Bay has to pay Penticton’s Cherry Lane mall

The ruling found that there had been no unavoidable delay preventing the Bay from paying their rent

Summerland cidery Millionaires' Row is hosting a Father's Day car and art show. (Facebook)
Vintage cars, art and cider for Father’s Day

Summerland’s Millionaires’ Row Cider Co. is hosting the car and art show

Marco Mendicino, Minister of Immigration, Refugees and Citizenship during a press conference in Ottawa on Thursday, May 13, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Canada to welcome 45,000 refugees this year, says immigration minister

Canada plans to increase persons admitted from 23,500 to 45,000 and expedite permanent residency applications

FILE – Most lanes remain closed at the Peace Arch border crossing into the U.S. from Canada, where the shared border has been closed for nonessential travel in an effort to prevent the spread of the coronavirus, Thursday, May 7, 2020, in Blaine, Wash. The restrictions at the border took effect March 21, while allowing trade and other travel deemed essential to continue. (AP Photo/Elaine Thompson)
Feds to issue update on border measures for fully vaccinated Canadians, permanent residents

Border with U.S. to remain closed to most until at least July 21

A portion of the George Road wildfire burns near Lytton, B.C. in this Friday, June 18, 2021 handout photo. THE CANADIAN PRESS/HO, BC Wildfire Service *MANDATORY CREDIT*
Blaze near Lytton spread across steep terrain, says BC Wildfire Service

Fire began Wednesday and is suspected to be human-caused, but remains under investigation

Blair Lebsack, owner of RGE RD restaurant, poses for a portrait in the dining room, in Edmonton, Friday, June 18, 2021. Canadian restaurants are having to find ways to deal with the rising cost of food. THE CANADIAN PRESS/Jason Franson
Canadian restaurateurs grapple with rising food costs, menu prices expected to rise

Restaurants are a low margin industry, so there’s not a lot of room to work in additional costs

RCMP crest. (Black Press Media files)
Fort St. John man arrested after allegedly inviting sexual touching from children

Two children reported the incident to a trusted adult right away

Barbara Violo, pharmacist and owner of The Junction Chemist Pharmacy, draws up a dose behind vials of both Pfizer-BioNTech and Oxford-AstraZeneca COVID-19 vaccines on the counter, in Toronto, Friday, June 18, 2021. An independent vaccine tracker website founded by a University of Saskatchewan student says just over 20 per cent of eligible Canadians — those 12 years old and above — are now fully vaccinated. THE CANADIAN PRESS/Nathan Denette
At least 20% of eligible Canadians fully vaccinated, 75% with one dose: data

Earlier projections for reopening at this milestone didn’t include Delta variant

Emily Steele holds up a collage of her son, 16-year-old Elijah-Iain Beauregard who was stabbed and killed in June 2019, outside of Kelowna Law Courts on June 18. (Aaron Hemens/Capital News)
Kelowna woman who fatally stabbed Eli Beauregard facing up to 1.5 years of jail time

Her jail sentence would be followed by an additional one to 1.5 years of supervision

Cpl. Scott MacLeod and Police Service Dog Jago. Jago was killed in the line of duty on Thursday, June 17. (RCMP)
Abbotsford police, RCMP grieve 4-year-old service dog killed in line of duty

Jago killed by armed suspect during ‘high-risk’ incident in Alberta

The George Road wildfire near Lytton, B.C., has grown to 250 hectares. (BC Wildfire Service)
B.C. drone sighting halts helicopters fighting 250 hectares of wildfire

‘If a drone collides with firefighting aircraft the consequences could be deadly,’ says BC Wildfire Service

Most Read