Bank of Canada

Royal Bank of Canada’s chief executive told an industry conference today that the Bank of Canada’s interest rate hike could result in as much as a $300-million bump in revenue for the financial institution over the next five years.

Read: Mortgage balances up, delinquency rates down

Dave McKay told the Scotiabank Financials Summit in Toronto that a 25-basis-point increase should benefit RBC’s retail franchise in the first year by roughly $100 million in revenue.

The Bank of Canada’s surprise rate hike Wednesday morning is a boost to Canadian banks’ net interest margins, which is the difference between the money they earn on the loans they make and what they pay out to savers.

The hike of the central bank’s overnight lending rate by 25 basis points to 1.0%, in turn, translates into more revenue for the country’s financial institutions.

Read: Recap: Canada’s banks gained momentum in Q3

Toronto-Dominion Bank CEO Bharat Masrani told the conference that rising interest rates are a positive phenomenon for the financial institution, but did not want to put a dollar figure on the impact.

Masrani said a rising rate environment is positive for TD as long as the hikes are done in an orderly fashion and do not tip the economy into a major slowdown.

Also read:

How growing household debt levels are putting Canada at risk

Originally published on Advisor.ca
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