National Bank will continue to benefit from rising interest rates in 2023, said Monday the CEO of the Quebec financial institution, Laurent Ferreira.
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The rate hike ‘had a huge impact [sur la rentabilité de la Banque] in 2022, and we’re going to see that impact continue into 2023,” Ferreira said Monday at a conference hosted by RBC Capital Markets.
The rapid rise in the Bank of Canada’s key rate caused the net interest margin of financial institutions to jump. This is the difference between the rate they pay on deposits and the rate they receive on loans.
During the fiscal year that ended on October 31, the National Bank’s net interest margin reached 2.14%, compared to 2.11% the previous year.
The Bank’s net interest income increased by 12% to reach $2.9 million and net profits by 14% to reach $1.3 million.
The institution also benefited from the increase in loan volumes (+ 8%) and deposits (+ 4%).
Resolutely optimistic, Laurent Ferreira said he was hopeful that the capping of interest rates, expected in the middle of the year, will not have a disproportionate effect on the profitability of the National Bank.
Customers are still able to pay
So far, he said, customers with variable rate loans are still able to meet their payments.
“We are very active in opening dialogue with them and ensuring that they will be able to absorb the rate increases,” said Mr. Ferreira.
“Generally, when we look at the performance of our portfolio [de prêts] as well as our customers’ ability to afford higher rates, that’s pretty good,” he added.