PricewaterhouseCoopers

PricewaterhouseCoopers

March 28, 2006 09:00 ET

Canadian Banks Need to Embrace Change More Than Ever: PricewaterhouseCoopers Annual Banking Survey

TORONTO, ONTARIO--(CCNMatthews - March 28, 2006) - Canada's top six banks enjoyed another record-breaking year in 2005, but will need to embrace change more than ever to meet the challenges of the coming year. These are the findings of Canadian Banks 2006, PricewaterhouseCoopers' (PwC) annual survey of the banking industry.

The Big Six earned a combined net income of over $12 billion and thrived in the strong Canadian economy. If not for litigation losses, aggregate results would have been over $16 billion, an increase of 18.5% over 2004.

"2005 was a banner year for Canadian banks. The economy provided a solid foundation for generating strong profits and the banks responded, delivering another year of outstanding results," says Diana Chant, Partner and Leader of the PwC Financial Services Practice in Canada. "But behind this performance are governance, risk and compliance projects impacting the operations of all banks."

These projects include the implementation of Sarbanes-Oxley 404 in 2006 for all but one of the Big Six. All banks are leading up to the implementation of the Basel Capital Accord and are also developing systems to manage the new accounting requirements for financial instruments. Added to this is the challenge of an uncertain U.S. economy and the negative consequences a slowdown south of the border would bring.

"Canadian banks and the rest of the world need a robust and growing U.S. economy," says Chant. "Spending is already trending down in the U.S. With high consumer debt, large fiscal deficits and a weak North American auto industry, it is likely there will be a slowdown south of the border in 2006. 2005 was a great year for Canadian banks. The question now is: Where do they go from here?"

Change is the focus of Canadian Banks 2006, and the survey addressed several emerging trends and hot-topics in the banking industry, including:

- sharpening client focus and progressive practices in segmentation

- aligning governance, risk and compliance with the business agenda

- operational tax risk

- re-engineering processes

- the outlook for economic capital in financial services

- the new Canadian Financial Instruments Standards

- 2005 accounting and reporting developments

"The banks are certain to find 2006 challenging. The year likely holds continued margin pressure, slower growth in lending volumes and increases in credit provisions." says Chant. "It will be a challenge for banks to continue the record-breaking profits of the past few years."

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 130,000 people in 148 countries work collaboratively using Connected Thinking to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 4,300 partners and staff in offices across the country.

(Unless otherwise indicated, "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, Canada, an Ontario limited liability partnership. PricewaterhouseCoopers LLP, Canada, is a member firm of PricewaterhouseCoopers International Limited.)

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