Financial Update

There have been numerous inquiries as to why many lenders have cut back discounts or entirely cancelled their Variable Rate products. We are seeing continued margin compression in the ARM product and it is becoming more expensive for our wholesalers. The following article discusses also how the banks are back to balancing the pricing according to risk, as well as the attached article which says that although our housing market remains strong, high risk clients are now seeing rates priced accordingly.


· TSX +13.92 The CRTC has conditionally approved the $51.7-billion takeover of BCE, removing another obstacle to the biggest buyout deal in Canadian corporate history.

· Dow -15.37

· Dollar -.15c to $ $98.15US

· Oil prices soared as two big market drivers -- lower than expected fuel inventories and another slide in the U.S. dollar -- had traders buying in force for the first time in a week. Prices rose in a reversal from last week when falling demand for oil and a strengthening USdollar pulled oil down nearly 10 per cent from a record near $112.

· Oil +$1.68 to close at $107.58 US per barrel

· Gold -.20c to $948.80

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>


Canada's big banks show humble face as credit crisis wears on


Wed Mar 26, 4:48 PM
By David Friend, The Canadian Press

TORONTO - Canada's biggest banks, cast into gloom after a long period of brilliant earnings, are displaying some humility after months of uncertainty, surprises and writedowns tied to troubled credit markets.

"When you look at the history of banks around the world, they are phenomenal profit machines - except that every five to seven years they figure out a way to blow themselves up and set themselves back," Ed Clark, chief executive of Toronto-Dominion Bank, told an industry conference Wednesday.

"If you can just avoid those errors you in fact have the best investment you can find around the world," said Clark, who heads the only major Canadian bank that has dodged writedowns directly related to the U.S. structured debt turmoil.

Clark was among top bank executives who addressed the issue of the drawn-out impact of the credit crunch at a financial services conference Wednesday hosted by the National Bank

The banking sector has been ravaged by investors worried that problems at international institutions could increasingly ripple into Canada.

The Toronto Stock Exchange financial sector has fallen about 18 per cent from its peak in October, and the troubles of international banks are keeping analysts cautious.

After months of multibillion-dollar writedowns by Citigroup, UBS and other global players, a new research report from Oppenheimer and Co. cut first-quarter profit forecasts for American banks by 84 per cent on average.

"I have been struck by how many wounded players there are out there," Clark said.

"I'm less confident today that this will cure itself quickly. There is a chance that it could happen in the second half, but I think there's equally a chance that it will take the full period of 2008 to cure itself."

However, Bank of Montreal chief executive Bill Downe predicted that summer will bring "a shift back to the focus of people on the future and where the best investment opportunities will be" on the broader market.

"There's enormous stimulus coming in the U.S.," Downe said. "I think maybe the thing to focus on is the combination of the resolution of many of the issues that individual banks have."

The wrenching reduction of asset valuations on international credit markets "was a necessary step," Downe added. "The risk-return balance was not there - we all know that."

Royal Bank CEO Gord Nixon said his bank had some regrets about its approach to credit.

"Are there areas that I wish we stayed away from? Absolutely," he said.

But "being a bank, people forget that we're in the credit business. It is impossible to be a bank or a financial institution and not be long-credit."

He added that despite the market troubles, Royal Bank hasn't given up on exploring the possibility of acquisitions, even if they are probably unlikely at this point.

"I'm not sure that our shareholders would be supportive, even at today's prices and today's economic environment," he said.

"We're certainly spending some time looking at what sort of bolder opportunities might be available out there."

CIBC chief executive Gerry McCaughey kept most of his comments focused on reworking the bank's risk operations, which have come under sharp scrutiny. The bank took the biggest writedowns of Canadian financial institutions, worth nearly $3 billion at the end of the last quarter.

"We've gone through our risk management group, and our risk management policies and practices and we're reviewing all of those to make sure that they're completely up to date with evolving industry practices," he said.

"Over the course of the near future we are going to stay very focused on balance sheet strength, as long as the environment remains as uncertain."

McCaughey also revealed that the bank has a total exposure of US$25 billion to monoline insurers.

The amount was larger than most analysts expected, but it was also more diversified, which suggests CIBC would face less risk if one insurer were to run into trouble, and the bank had to writedown the losses.

The CEO also said that the bank won't consider buying back any shares in the near future.

"The marketplace has shown that there can be surprises out there and I want to make sure that before we engaged in a buyback that we were absolutely certain that we had it down pat," he told analysts.

The current attitude of the bank executives shows that while there's some hope a recovery is near, reality suggests it could take some more time.

"The conditions that they're staring into looking forward are looking quite dismal over the very near term and I suspect that everyone is just waiting with baited breath to see just how low the U.S. economy will swing," said Brad Smith of Blackmont Capital.

"That will obviously have implications for their business by itself. It's not a time to be overly optimistic."