Toronto building boom

[Automation Gallery]

Wow thats good news, thanks Grump for that info and welcome to the forum.
I wonder if setting up shop in Toronto they would locate in one of the proposed office towers.

 

[MikeRoss]

Didnt know where to put this, but apparently the CEO of a major bank in the UK (roughly the size of ScotiaBank) wants to move their headquarters to Canada.

http://www.thisismoney.co.uk/money/...-chief-Peter-Sands-plots-Canadian-escape.html

That's good sign that the Canadian economy is really strong right now.

 

[taal]

I wouldn't read much into it; Those are the sort of threaten your country so they give you more tax credits or we'll leave plays big companies carry out.

They didn't say Toronto either, juts "Canada"

 

[AKS]

From what I've read in the past about Canada's system, I think they are very tight on foreign banks in Canada. There can only be a certain percentage of foreign ownership. The banking system is quite controlled so that might why our system is strong. There's only 5 major banks in Canada. Enough for competition but yet remain strong.

 

[brockm]

From what I've read in the past about Canada's system, I think they are very tight on foreign banks in Canada. There can only be a certain percentage of foreign ownership. The banking system is quite controlled so that might why our system is strong. There's only 5 major banks in Canada. Enough for competition but yet remain strong.

Our banking system, like other banking systems, is strong until it isn't. I would argue quite vociferously that Canadian banks are nowhere as strong or shock-resistant as their international counterparts. In fact, Societé Generale and Citibank are both and were both far more capitalized at the worst depths of their respective criseses than any of the Big Five Canadian banks are right now.

If any of the Big Five were to face a substantial shock and find a considerable portion of their capital unrecoverable, they would be unable to fend off collapse without government assistance.

And to measure the safety of a bank based on its government backstop is absurd.

 

[Lenser]

Agreed.. We are hardly immune to bank collapses. Send strong enough tremors through the system and watch what happens. It's a house of cards.

 

[kkgg7]

From what I've read in the past about Canada's system, I think they are very tight on foreign banks in Canada. There can only be a certain percentage of foreign ownership. The banking system is quite controlled so that might why our system is strong. There's only 5 major banks in Canada. Enough for competition but yet remain strong.

I also don't think Canada's banks are that "strong". Let's see what strong means:
1) The government makes sure there is minimum competition, from either Canadian or foreign banks. TD banks just entered the US market a few years ago and is already targeting the become the third largest in the New York area. Is there any foreign banks that come clost to the Big 5/6? No, not because our banks are so competitive, but because the government doesn't allow anyone to. Canadian banks are not strong because they are competitive, but because they are protected.

2) Minium investment overseas. Compared with big international banks elsewhere, Canadian banks overseas operation is still quite small and limited and are still largely domestic banks, which means their profit is not geographically diversifed. TD etc are trying to expand overseas, but it is limited to North America market, which provides little diversification because Canadian and US markets are closely linked.

3) Low risk exposure. While we laugh at the fall of large banks elsewhere during the financial crisis and claim "I told you so", Canadian banks' low risk tolerance is their own enemy. Being conservative is not necessarily a good thing. While you can avoid large loss in turmoils, you also give up profits in good times. Canadian banks' relatively stableness during the crisis didn't stem from their more prudent risk management, as many seem to believe, but from their overall conservativeness no matter what the situation is out there. JPMorgan etc actually didn't suffer that much and is standing stronger than ever, and that's what we call a "winner". If you hide your cash under the matress all the time, of course no stock market crisis will ever affect you. But the thing is, when people were actually making big bucks, you are not either.

That being said, there is nothing wrong with Canadian banks being conservative, if that's what Canada wants. But let's not fall into the dellusion that Canadian banks are "stronger" than more adventurous banks. Strong means make more money when others are also making money, and suffer less when everyone is losing from being smart and prudent, not earning less and losing less from simply being conservative.

 

[kkgg7]

Out of curiosity, I did some simple analysis comparing whether Canadians banks are actually doing better by looking at the 2003 and 2011 financials of JPMorgan and RBC, and here is a snapshot of my result,

RBC
2003 Revenue 17.0, net income 3.0, asset 413, tier 1 capital 9.7%
2011 Revenue 27.4, net income 4.9, asset 752, tier 1 capital 13.3%

JPM
2003 Revenue 27.3, net income 1.7, asset 693, tier 1 capital 8.3%
2011 Revenue 97.2, net income 19.0, asset 2266, tier 1 capital 12.3%

Who is doing better? Let's see.
during the 2003-2011 period, JPMorgan's revenue, net income and asset increases by 192%, 182% and 194%, for RBC, it was 62%, 60% and 82%;
in terms of profitability, JPM's net margin is stable at about 18%, and RBC stable also at about 20%, despite having less competition nationally.
RBC's tier one capital ratio is about 1% higher than JPM in 2011, from 1.4% in 2003.

Do we say RBC is "strong" relative to JPMorgan? The latter, being a much larger bank, grew much faster. In 2003, JPMorgan was only twice as big as RBC, in 2011, it is 3.5 times the size. In 2003, JPM's profit was 120% more than RBC, in 2011, it is 290% more.

 

[Tewder]

I'm not sure about JPM but RBC is fairly conservative as a bank, unlike TD for example.

Also interesting to note that you will find Canadian banks all throughout the Caribbean, including RBC, Scotiabank and TD.

 

[brockm]

Out of curiosity, I did some simply analysis comparing whether Canadians banks are actually doing better by looking at the 2003 and 2011 financials of JPMorgan and RBC, and here is my result,

RBC
2003 Revenue 17.0, net income 3.0, asset 413, tier 1 capital 9.7%
2011 Revenue 27.4, net income 4.9, asset 752, tier 1 capital 13.3%

JPM
2003 Revenue 27.3, net income 1.7, asset 693, tier 1 capital 8.3%
2011 Revenue 97.2, net income 19.0, asset 2266, tier 1 capital 12.3%

Who is doing better? Let's see.
during the 2003-2011 period, JPMorgan's revenue, net income and asset increases by 192%, 182% and 194%, for RBC, it was 62%, 60% and 82%;
in terms of profitability, JPM's net margin is stable at about 18%, and RBC stable also at about 20%.
RBC's tier one capital ratio is been about 1% higher than JPM in both years.

Do we say RBC is "strong" relative to JPMorgan? The latter, being a much larger bank, grew much faster. In 2003, JPMorgan was only twice as big as RBC, in 2011, it is 3.5 times the size.

No. Canadian banks are middle-of-the-pack in the OECD as far as their capitalization ratios go. There are banks with far better capitalization than all of the Big Five which have run into trouble in this financial crisis. The fact is, Canadian banks have been peddling cheap credit at breakneck speed into this construction boom. Everybody is convinced that Canada is different, that the demand really justifies the price appreciation, and a whole bunch of other rationalizations.

Someone will inevitably tell me that all is well because CMHC is holding all the risky MBS, which makes me feel just great as a taxpayer.

The bottom line is that there is no free market in banking in the Western world. There hasn't been for a century. In the world of central banking, the big banks are merely franchises of the central banks who peddle in, and profit off the creation of new credit. They get really rich, and the rest of us pay our inflation tax. Those of us who can qualify for cheap credit (low interest mortgages and what not) at least have something to show for it. But if you're a poor bastard who can barely make ends meat, well... fuck you! Pay your inflation tax so the rest of us can have cheap credit!

Yay for government controlled interest rates!

EDIT: When I say Canadian banks are "middle-of-the-pack" I don't mean that as a complement. Rather, I mean... most of the banks in the ENTIRE Western world are built on a house of cards.

 

[kkgg7]

I'm not sure about JPM but RBC is fairly conservative as a bank, unlike TD for example.

Also interesting to note that you will find Canadian banks all throughout the Caribbean, including RBC, Scotiabank and TD.

You should know that the entire Caribbean is highly correlated with the US economy, if not entirely dependent on it. Investing in the Caribbeans is hardly what I call "diversification". The reason why I calculated those numbers is to show that Canadians banks are not as strong and robust and American banks are not that fragile as so many of us seem to believe. While perservating capital is essential, growth and generation of new value are indispensable when we look at how banks are doing as well, and in that respect, we can see that banks like RBC are not that impressive.

I will take a look at TD's financial performance when I have some time.

 

[kkgg7]

No. Canadian banks are middle-of-the-pack in the OECD as far as their capitalization ratios go. There are banks with far better capitalization than all of the Big Five which have run into trouble in this financial crisis. The fact is, Canadian banks have been peddling cheap credit at breakneck speed into this construction boom. Everybody is convinced that Canada is different, that the demand really justifies the price appreciation, and a whole bunch of other rationalizations.

Someone will inevitably tell me that all is well because CMHC is holding all the risky MBS, which makes me feel just great as a taxpayer.

The bottom line is that there is no free market in banking in the Western world. There hasn't been for a century. In the world of central banking, the big banks are merely franchises of the central banks who peddle in, and profit off the creation of new credit. They get really rich, and the rest of us pay our inflation tax. Those of us who can qualify for cheap credit (low interest mortgages and what not) at least have something to show for it. But if you're a poor bastard who can barely make ends meat, well... fuck you! Pay your inflation tax so the rest of us can have cheap credit!

Yay for government controlled interest rates!

EDIT: When I say Canadian banks are "middle-of-the-pack" I don't mean that as a complement. Rather, I mean... most of the banks in the ENTIRE Western world are built on a house of cards.

I totally agree with the concern about cheap and easy mortgage banks are giving out now. I often read about that a high percentage of houseowners will have trouble with payment if mortgage rate is raised by 1 or 2 per cent, and was thinking, if that is the case, the banks shouldn't grant the mortgages in the first place.

Today, a five year fixed mortgage is about 4%, but I would say if a person can't afford it when the rate goes to 6%, he should not get mortgage approval at all, not to mention the fact many borrowing is based on the floating rate, which is absolutely absurb. When someone can't afford a house, just don't let them buy a house, ever. This is the first lesson we should learn from the US.

 

[brockm]

I totally agree with the concern about cheap and easy mortgage banks are giving out now. I often read about that a high percentage of houseowners will have trouble with payment if mortgage rate is raised by 1 or 2 per cent, and was thinking, if that is the case, the banks shouldn't grant the mortgages in the first place.

There's a simple solution to it, and I'll lay it out clearly:

1. Shut down the Bank of Canada and deregulate the Canadian monetary system; and
2. Parcel up and liquidate the CMHC and disband it.

Boom! Cheap credit gone. Just like that.

Why people feel so warm and cozy that our monetary master, Mark Carney controls the rate of credit and money creation at whim, based on the projections and macroeconomic estimates of a crack team of central banking economists mystifies me.

There never would be these credit bubbles if it wasn't for central banking. At least, they'd never reach the sheer scope that the power of fiat currency and central bankers with unlimited power enable them to.

Shitting money out of the central bank's ass is the new pixie dust of modern economics. Economy not doing well? Print money. Government overspending? Monetize it. House's unaffordable? Print money and socialize the risk to take interest well below its natural market level.

Letting the market determine prices for houses and borrowing? Hahaha! That's funny! Everyone knows markets don't work. Which is why we need our brave central planners to ensure unbound asset appreciation in the real estate market!

Of course, when it all comes crashing down, it will solely be laid at the feet of "free markets". Except there nothing particularly free market about anything that's henceforth been described. It's a managed economy. Mark Carney is a central planner. And the primary lenders are his minions.

 

[TrickyRicky]

I second the notion that that Standard Charter article is nothing but a political discourse. Chances of Standard Charter moving their headquarters to Toronto are remote at best.

Personally, I am increasingly becoming dis-enamoured with our residential condo-based boom. While I generally approve of it and it's nice to have it, the future lies in increasing the commercial, industrial, and institutional activity in this city. It's not like the city is standing still in this regard but I find myself really not caring much about the vast number of condo projects that flood into the Project and Construction section of this forum. On the other hand I'm excited about any project in the above sectors even if the architecture itself is underwhelming. A ten storey commercial head-office is more exciting to me than a residential tower that touches the sky.

 

[Riverdale Rink Rat]

In fact, Societé Generale and Citibank are both and were both far more capitalized at the worst depths of their respective criseses than any of the Big Five Canadian banks are right now.

What??? That's absolutely false. And ridiculous on the face of it. Where do you get that statistic -- and how do you reconcile it with the fact that both those entities had to get government bailouts, and none of the Canadian banks did?