Canada’s 2024 Finance by the Numbers: Bank Profits Rise, Rates Fall, and Mortgage Delinquencies Edge Up

As Canada closed the books on 2024, the overarching questions that had framed the early-year outlook—whether the economy could sidestep a recession and how interest rates would evolve—had largely given way to a more nuanced narrative. Banks and borrowers proved more resilient than feared, even as the year’s headlines were dominated by blockbuster deals, unexpected twists, and a few high-profile governance and regulatory stories. A year that began with caution about mortgage renewals at higher rates and the potential strain on indebted households ended with a more measured sense of stability, but with clear foreshadowing of how policy moves and capital markets would shape the sector in 2025. The financial landscape was characterized by a mix of solid profitability, prudent risk management, and evolving strategy as lenders navigated a complex mix of domestic strength and global uncertainty. This article shares in-depth, data-driven insights into the Canadian financial sector’s performance in 2024, drawing on key numbers and developments that defined the year for the Big Six banks and the broader market.

A Year in Transition: The Canadian Financial Landscape in 2024

At the outset of 2024, the path for the Canadian economy looked uncertain, with analysts weighing the odds of a recession against the possibility of a soft landing. Banks, mindful of the heavy debt carried by households and the persistence of elevated mortgage rates, set aside billions to prepare for potential stress in the consumer credit space. This cautious provisioning reflected a broader risk-management mindset that persisted through the year, even as actual outcomes proved more resilient than some forecasters had warned. The environment was one in which lenders had to balance the discipline of tighter credit conditions with the need to support a still-fragile macro backdrop, all while customers renewed mortgages at higher rates and sought stability amid shifting housing costs. The year’s early mood, therefore, was one of guarded optimism—recognizing risk, but also recognizing the strength that a diversified banking system could bring to the Canadian economy.

As the year progressed, the financial sector’s narrative evolved into one of stronger-than-expected returns, helped in part by robust profitability and a favorable, albeit gradually easing, rate environment. The sector faced persistent concerns about mortgage defaults and borrower stress given the higher-rate regime, but the soft landing scenario helped temper those fears. Banks reported profitability that remained solid thanks to diverse revenue streams, expense discipline, and ongoing demand for financial services across retail, commercial, and wealth segments. The transition from fear to steadiness underscored a broader theme: Canada’s largest banks continued to navigate a complex mix of domestic strength and external pressures—from global capital markets to regulatory shifts—while maintaining stable earnings and, in some cases, expanding market reach through strategic acquisitions and portfolio optimization. This section sets the stage for the ensuing sections, which drill into the KPI-driven storylines that defined 2024 for Canada’s financial sector.

The overarching macro backdrop included a Bank of Canada policy trajectory that influenced pricing, lending, and consumer behavior. By year-end, the Bank’s rate stood at 3.25 percent, marking a notable decline from the peak reached in the middle of the year as policy actions and the evolving economic data allowed for a more accommodative stance. The rate path was closely watched because it translated into changes in the prime lending rate and, consequently, the borrowing costs faced by households and businesses. Within this framework, banks followed the central bank’s lead, adjusting their own prime rates to respond to the policy environment. The prospect of further easing in 2025 was widely anticipated by market participants, with multiple banks projecting further rate reductions as the economy cooled and inflation trended toward target levels. The contrast with the United States was also a critical factor: while Canada moved more decisively on rate cuts, U.S. rate curves moved in a different rhythm, giving rise to ongoing cross-border funding dynamics and competitive considerations in the domestic banking market.

The year also featured a set of notable shifts in market sentiment and industry structure. One of the most visible themes was the consolidation and strategic realignment resulting from major deals—most prominently the RBC- HSBC Canada acquisition that would reshape the competitive landscape in Canadian banking by absorbing a significant retail and commercial banking footprint. That deal contributed to a broader sense that the sector’s dynamics were moving toward greater scale and integration, even as competition remained intense in key segments, including mortgages, deposits, and wealth management. In the broader economy, housing and labor markets remained central to risk and opportunity. Mortgage renewals continued to unfold in an environment of elevated rates, which had been the subject of considerable worry in the early months of the year, while job markets and consumer spending supported a steady, if modest, growth trajectory. Against this backdrop, the 2024 financial year became a study in resilience: banks earnings navigated a high-rate environment, while careful balance-sheet management helped shield customers and investors from sharper economic shocks.

The year’s narrative also carried undercurrents of governance and regulatory developments that would shape the sector’s path into 2025. Within this context, lenders faced ongoing scrutiny and policy updates aimed at strengthening financial stability and consumer protection. These developments included heightened attention to risk management practices, capital adequacy, and the social license of banking activities in an era where climate considerations and ethical investing continued to influence capital allocation. In sum, 2024’s opening months set a tone of cautious optimism, balanced by a vigilance to risk, and a recognition that the sector’s strength would be tested by both micro-level events—like delinquencies in specific portfolios—and macro-level moves, such as rate adjustments and regulatory changes that would echo through future earnings and strategy decisions.

As the year drew toward its close, analysts and bank leadership alike reflected on a period of relative stabilization. The combination of improved risk-taking discipline, the resilience of consumer demand, and the strategic leverage of scale created a more favorable footing for 2025. At the same time, the year produced clear signals about where the most consequential decision-making would occur in the months ahead: rate policy and inflation dynamics, large-scale M&A activity, and the evolving mix of lending and investment portfolios that banks would deploy to sustain growth. The narrative of 2024, therefore, was not one of dramatic shocks but of steady, measured progress in a complex environment—a frame that set up the sector for a new phase of capital deployment, risk management, and strategic positioning as Canada’s banks prepared to translate profitability into durable value for shareholders, customers, and the broader economy.

Bank Profitability and Rate Environment

The fiscal year 2024 delivered a robust income picture for Canada’s Big Six banks, reinforcing the idea that a diversified earnings mix could sustain profitability even as consumer credit faced heightened risk. The adjusted profits across the six largest lenders totaled a remarkable $58.771 billion for the 2024 fiscal year, marking an increase of about a billion dollars from the prior year. This uptick occurred despite the fact that mortgage default fears and borrower stress had loomed large going into 2024, partly due to the high-rate environment and the sensitivity of household balance sheets to rate movements. Even as loan growth slowed, the sector’s profitability remained resilient, supported by a combination of strong net interest income, fee-based services, and prudent expense management. The year’s performance thus underscored the capacity of Canada’s top banks to generate substantial returns on a platform that balances retail, commercial, and wealth management activities across varied market conditions.

From a risk-management vantage point, the banks began the year with a posture of caution, reserving capital against potential deterioration in borrower quality. This precautionary stance was a logical response to elevated debt levels among Canadian consumers and the forecast of a gradual normalization of rates. Yet, as the year progressed, the actual experience validated a degree of resilience: delinquencies did not reach the feared levels, and profit engines in traditional segments—lending, payment services, and advisory capabilities—continued to perform well. In a soft landing scenario, banks could leverage stable deposit bases, favorable funding costs, and the tailwinds of a gradually improving macro environment to support ongoing profitability. The combination of these forces gave executives confidence about better growth prospects in 2025, particularly in the latter half of the year, as central-bank rate cuts continued to filter through the economy and stimulate lending, investment, and consumer activity.

A central driver of the year’s performance was the Bank of Canada’s rate trajectory. At year-end, the BoC target rate stood at 3.25 percent, representing a decline from the five percent level observed at the start of June as inflation cooled and growth moderated. Banks aligned their prime rates to the central bank’s direction, with pricing adjustments visible across consumer and business lending products. For 2025, the consensus among many analysts and lenders suggested further rate reductions would be on the horizon, enabling a more favorable borrowing climate and potential acceleration in loan growth as households and businesses anticipated easier financing terms. In parallel, the U.S. Federal Reserve signaled a more modest pace of policy easing, suggesting that it might cut rates only twice in the coming year, which contributed to a nuanced cross-border dynamic: while Canada pursued a more pronounced easing path, the U.S. trajectory remained comparatively restrained. This divergence created a backdrop in which Canadian banks could benefit from improving domestic demand and relatively competitive financing terms, while still monitoring global rates and currency moves that could influence funding costs and capital allocation.

The credit and lending environment during 2024 also featured an emphasis on prudent risk management and portfolio diversification. Banks navigated the tension between supporting borrowers at higher rates and preserving credit quality, a balance that required ongoing vigilance over loan quality indicators, client concentration risk, and macroeconomic sensitivity. The result was a year in which profitability remained strong, even as the sector faced the structural headwinds of a high-rate economy that gradually moved toward stabilization. Looking ahead to 2025, the expectation among market participants was that the combination of rate relief in the latter part of 2024 and early 2025 would emerge as a meaningful tailwind for net interest income, provided that inflation stayed on target and the broader economy maintained a stable trajectory. The rate environment thus acted as both a constraint and an opportunity: it curtailed some growth in credit expansion while enabling banks to optimize funding and resilience, positioning the sector to translate improved monetary conditions into continued earnings strength.

In summary, 2024 demonstrated that Canada’s banking system could sustain profitability in a climate of higher interest rates and rising household leverage. The year’s profitability metrics, along with the policy backdrop and rate dynamics, painted a picture of a sector that could adapt and persevere through shifting conditions. The anticipated path for 2025 hinged on rate cuts moving through the economy, the resilience of consumer demand, and the ability of banks to maintain disciplined risk management while pursuing growth through efficiency gains, product innovation, and selective acquisitions that extended market reach and revenue diversification. The result was a sector that, by year-end, stood on solid footing, with earnings visibility supported by a combination of core banking operations and strategic initiatives designed to sustain profitability even as external conditions evolved.

Mortgage Delinquencies and Household Credit Risk

One of the defining risk metrics for the Canadian mortgage market in 2024 was the trend in delinquency rates, which provided a window into household financial health and the resilience of banks’ mortgage portfolios under elevated interest rates. The mortgage delinquency rate in Canada, as measured in the third quarter by Equifax Canada, stood at 0.20 percent. This figure, while higher than its recent historical lows, remained below the pre-pandemic averages and well within a range that lenders considered manageable given the current macro backdrop. Specifically, the delinquency rate was up from the historically low point of 0.14 percent observed two years earlier, reflecting the cumulative impact of higher borrowing costs on households but not triggering systemic stress. Banks anticipated a continuing, gentle creep higher in delinquencies into the following year as job losses and sector-specific vulnerabilities could exert upward pressure, yet they remained confident in the overall health of residential portfolios.

The banks’ forecasts around delinquencies were anchored in a cautious but constructive outlook. Management teams expected that, while default rates could marginally rise as the labor market adjusts and some borrowers encounter refinancing challenges, the aggregate mortgage portfolios would stay broadly stable. In this context, lenders highlighted the importance of proactive risk management: heightened screening standards for new loans, ongoing stress testing under various rate scenarios, and vigilant monitoring of borrower behavior and arrears. The expectation that delinquencies would escalate modestly in 2025 was tied to macroeconomic projections that accounted for unemployment trends and potential earnings volatility, but banks asserted they were comfortable with the overall health of their mortgage books. This stance reflected a balanced view that while consumer risk would not disappear, it could be managed through prudent underwriting standards, diversification of borrower segments, and effective workout strategies for delinquencies.

From an industry-wide perspective, the delinquency data underscored a nuanced risk landscape. Canada’s mortgage market remained supported by resilient household balance sheets for many borrowers, aided by stable employment, diversified income streams, and a high degree of mortgage product sophistication. Lenders also pointed to the broader macroeconomic softness that was anticipated for 2025 as a potential dampening force on delinquency pressures. In parallel, the banks’ exposure to mortgage risk was being actively managed through portfolio diversification, with emphasis on prime products and credit-quality improvements that had accumulated over the past several years. The improvement in delinquency risk discipline was complemented by ongoing regulatory reforms and risk-sharing mechanisms that could influence the cost and availability of credit in the residential market. Overall, the delinquency signal in 2024 indicated a cautious optimism: delinquency rates were not soaring, but the sector remained vigilant and prepared for a measured adjustment in 2025 as economic conditions evolved.

Beyond the mortgage portfolios themselves, the broader credit landscape for Canadian consumers revealed both resilience and areas of concern. The high-rate environment had a discernible impact on household budgets, with consumers re-evaluating discretionary spending and debt levels. But at the same time, many households had built up savings cushions and benefited from improved job stability in certain sectors, which helped mitigate some of the risk associated with higher servicing costs. Banks responded with a range of measures designed to support customers who faced borrowing stress, including enhanced digital tools for payment management, tailored refinancing options, and flexible repayment plans where appropriate. Regulators continued to emphasize the importance of prudent lending practices and consumer protection, reinforcing the notion that banks would be expected to balance profitability with responsible lending. In this framework, 2024’s delinquencies served as a barometer of consumer health—one that suggested manageable risk but with clear signals that risk management and proactive customer support would remain essential as the economy navigated 2025.

In sum, the mortgage delinquency story of 2024 captured a sector in balance: not immune to the pressures of higher rates and shifting employment dynamics, but disciplined in risk management and resilient in its underwriting and workout capabilities. Banks’ expectations for 2025 centered on a gradual improvement in the macro environment, with some uplift from rate cuts and renewed consumer confidence. While delinquencies could drift higher, the prevailing view was that residential credit risk would be contained through a combination of conservative lending standards, proactive borrower support, and a robust financial system capable of absorbing moderate stress without destabilizing the broader economy. The year thus closed with a sense of measured optimism about the housing and consumer credit landscape, tempered by realistic assessments of what higher rates and evolving labor market conditions could mean in the near term.

Major Deals, Market Capitalization, and Corporate Governance

As 2024 progressed, the Canadian banking sector’s strategic landscape was reshaped by a series of significant corporate moves that underscores the ongoing evolution of competitive dynamics and scale in the market. The most consequential development for the year was the completion of the Royal Bank of Canada’s (RBC) acquisition of HSBC Bank Canada, a transformative deal that removed a dynamic competitor from the mortgage and broader banking space and significantly altered the competitive balance. The deal’s closing carried with it a wave of operational and regulatory considerations, including client migrations, integration of product platforms, and the alignment of risk management practices across a larger, more diversified retail footprint. The RBC-HSBC Canada transaction added critical scale to RBC’s suite of consumer and commercial banking services and expanded its reach in key markets and customer segments, particularly in the residential mortgage arena where competition remained intense. The aftermath included a cross-pollination of clients, assets, and capabilities that would influence pricing, product innovation, and service delivery well into 2025 and beyond. The integration process would be watched closely by investors for signs of synergies, cost efficiencies, and revenue growth that could translate into stronger long-term earnings.

Within this strategic shift, a related data point highlighted the migration of customers in the wake of the HSBC Canada transaction. Roughly 780,000 customers were moved over to RBC as part of the integration, a testament to the scale of the deal and RBC’s capacity to absorb a substantial new customer base. Alongside the customer transition, RBC also assumed approximately 4,500 employees and $108.5 billion in assets. This workforce and asset transfer signaled the expansion of RBC’s retail and wealth management capabilities, as well as the broader funding and risk management advantages that come with a larger balance sheet and diversified business mix. The move reinforced RBC’s position as a market leader in Canada, enabling further product cross-sell opportunities and enhanced capital allocation across consumer and commercial portfolios.

The competitive implications of the HSBC Canada acquisition extended beyond customer counts and assets. The infusion of HSBC Canada’s strategic capabilities into RBC’s platform helped intensify the competitive landscape, with rivals recognizing that rate competition would remain robust as banks sought to maintain deposit bases, expand loan books, and optimize funding costs. In response, other major players, including Toronto-Dominion Bank (TD) and the Bank of Nova Scotia (Scotiabank), recalibrated their own strategies to preserve market share, manage risk, and position themselves for a more consolidated market structure. While consolidation could yield efficiency gains and scale benefits, it also implied higher barriers to entry for smaller firms, potentially encouraging continued consolidation or strategic partnerships among larger institutions. The RBC-HSBC Canada deal thus served as a focal point for 2024’s strategic narrative, illustrating how large-scale mergers can reshape pricing dynamics, customer experience, and the allocation of capital across Canada’s banking ecosystem.

The financial landscape in 2024 also saw notable shifts in market capitalization, which provided a barometer for investor sentiment and corporate performance. RBC emerged as a standout in this space, with market capitalization reaching approximately $246 billion by the end of the year, reflecting a near 30 percent gain in 2024 and reinforcing RBC’s stature as Canada’s largest company by market value. The strength of RBC’s value proposition was driven by a combination of successful deal execution, improved investor confidence in the sector, and easing concerns about the broader banking environment. The gains placed RBC ahead of other major peers, such as Shopify, which traded at around $199 billion in market cap, and Toronto-Dominion Bank (TD Bank Group), which stood at roughly $133 billion by year-end. The relative performance highlighted investor enthusiasm for a bank-led growth strategy and the potential for improved profitability through scale and efficiency. In this context, RBC’s market leadership not only reflected past performance but also signaled expectations for continued value creation in 2025 through disciplined capital allocation, strategic acquisitions, and execution of integration milestones from the HSBC Canada transaction.

Beyond market capitalization, a separate corporate governance storyline emerged involving key leadership transitions and legal disputes within the sector. Royal Bank of Canada’s former chief financial officer, Nadine Ahn, was involved in a high-profile lawsuit alleging wrongful dismissal. The case, which concluded with RBC facing a $49 million settlement claim, underscored the governance and personnel risks that large institutions must manage as they navigate complex corporate restructurings and large-scale integrations. The dispute also drew attention to how executives handle internal policies, relationships, and performance expectations within the high-stakes context of major acquisitions and strategic reorganizations. In another move affecting leadership continuity, Nadine Ahn shifted to Canaccord Genius, taking on the role of deputy chief financial officer in October. This transition highlighted the ongoing process of leadership renewal and talent mobility within Canada’s financial services sector, illustrating how executives leverage opportunities across institutions to advance their careers while influencing the strategic directions of their new employers. The governance narrative thus complemented the deal-driven storyline, painting a comprehensive picture of how corporate decisions, leadership changes, and legal matters collectively shape the reputation and performance of Canada’s banking champions.

The broader performance picture for 2024 was tempered by market perceptions about risk and growth. Scotiabank, for instance, held a significant stake in Israeli defense contractor Elbit Systems Ltd. through its subsidiary 1832 Asset Management. By year-end, Scotiabank reported 557,400 shares in Elbit Systems, valued at roughly US$144 million, down from the 2,236,500 shares valued at about US$443 million at the end of 2023. The reduction in holdings reflected ongoing investor concerns and portfolio rebalancing in response to geopolitical tensions and market risk, rather than an immediate shift in Scotiabank’s strategic intent. The bank stated that the decision to reduce its exposure was not driven by protests surrounding Elbit’s role in supplying weapons used in the Gaza conflict, but rather part of broader asset management and risk-control considerations managed by 1832 Asset Management. The Elbit position thus became a case study in how global geostrategic risk can intersect with domestic banking portfolios, underscoring the importance of robust governance around international investment holdings.

Meanwhile, the environmental and energy-financing dimension of the sector’s activity remained a focal point for many banks. A March 2023 report from a coalition of climate groups highlighted that Canada’s five largest banks provided around US$104 billion in fossil-fuel financing in 2023. Although this represented a decline relative to previous years, it signified the continued reliance of major Canadian lenders on oil and gas funding as part of their broader client financing mix. RBC stood out in this landscape, having topped the report’s list at US$28.2 billion in fossil-fuel lending for that year. Yet the bank also signaled a strategic pivot toward renewables, pledging to triple its renewable energy funding to $15 billion by 2030 as part of a broader transition in its energy financing portfolio. This dual-track approach—maintaining a level of traditional fossil-fuel financing while expanding investment in renewable energy—illustrated how Canada’s major banks were balancing the demand for client services with the imperative to align with climate objectives and long-term sustainability goals. The sector’s environmental-financing narrative in 2024 thus revolved around a careful, strategic recalibration of portfolio risk and a commitment to expanded funding for cleaner energy, even as fossil-fuel lending remained a meaningful component of the business model for many institutions.

The year also included regulatory and policy shifts that could reshape the financial services landscape in years to come. Notably, there was a significant tightening of the legal interest-rate framework. The maximum legal rate, currently set at 60 percent based on an effective annual rate that factors in compounding, faced a regulatory transformation that would see the cap reduced to 35 percent APR. This reform, aimed at protecting consumers from excessively high borrowing costs and curbing predatory lending practices, was introduced with new restrictions around payday lending and related credit products. The changes were slated to take effect on January 1 of the following year, signaling a meaningful reform in the consumer credit space that would influence lender pricing, product design, and risk management as banks adapted to the new regulatory environment. The regulatory backdrop in 2024 thus served as a critical tailwind for discussions about responsible lending, consumer protection, and the evolving role of financial institutions in safeguarding households while continuing to provide access to credit.

Taken together, 2024’s corporate and market developments painted a picture of a sector that was both transformative and resilient. Deals like RBC’s HSBC Canada acquisition underscored the power of scale and integration in an intensely competitive market, while market capitalization trends highlighted investor confidence in the sector’s long-term profitability. Governance and leadership dynamics signaled the importance of talent and oversight in successfully navigating large-scale mergers and portfolio adjustments. The environmental and regulatory currents—ranging from fossil-fuel financing levels to the sudden emphasis on consumer protection through APR caps—reframed how banks would allocate capital, manage risk, and pursue growth in 2025. As the sector moved forward, it did so with a confidence earned from steady profitability, a more diversified product mix, and a strategic focus on sustainable, compliant, and customer-centric growth that would define the next chapter for Canada’s financial institutions.

Market Leadership and Strategic Positioning

The year culminated in a clear signal that market leadership for Canada’s financial institutions would continue to be defined by scale, strategic execution, and disciplined capital management. RBC’s continued growth in market capitalization—reaching around $246 billion by the end of 2024—placed the bank in a commanding position within Canada’s corporate landscape. This performance, driven by robust earnings, strategic acquisitions, and favorable investor sentiment, reinforced RBC’s status as the country’s largest company by market value. The bank’s ability to convert strategic initiatives into tangible value remained a central theme, with the HSBC Canada deal acting as a pivotal catalyst for enhanced scale, diversified revenue streams, and broader depositor reach. The market’s re-rating of RBC reflected investor confidence in the bank’s execution capabilities, as well as the expectation that scale and integration would translate into sustainable profitability in a climate that demanded resilience and adaptability.

Against this backdrop, other leading institutions also demonstrated strong market presence and competitive strength. Shopify’s capitalization, while substantial, lagged behind the traditional banking behemoths, reflecting the different risk and growth profiles of non-bank tech companies. TD Bank Group maintained a substantial market capitalization, around $133 billion, illustrating continued investor interest in diversified financial services firms with strong domestic footprints and enduring customer relationships. The relative positioning among these major players underscored the ongoing competition for share of wallet, deposit funding, and cross-sell opportunities across retail, commercial, and wealth management lines. The broader message was that Canada’s top banks were closely aligned in terms of scale and profitability, but differentiation would continue to emerge through strategic investments, risk management practices, and the ability to integrate complex acquisitions with minimal disruption to operations and customer experience.

Leadership changes within the banking sector captured attention as part of a broader narrative about succession planning, governance, and human capital management in large institutions. The Nadine Ahn case highlighted the legal complexities that can accompany executive leadership, particularly when the company undergoes significant organizational change. The dispute, including allegations around wrongful dismissal and related personal disclosures, placed emphasis on how institutions manage internal policies and the reputational implications of such disputes. Ahn’s transition to Canaccord Genuity as deputy chief financial officer in October underscored the fluid movement of senior financial talent within Canada’s financial services landscape, illustrating how leadership mobility can shape talent ecosystems and influence strategic decision-making across organizations. This governance thread, coupled with the scale-driven narratives of acquisitions and market expansion, suggested that the sector’s success in 2025 would be closely tied to strong leadership, rigorous risk controls, and the ability to translate strategic ambitions into enduring competitive advantages.

In a broader sense, Scotiabank’s strategic investments and risk management choices were illustrative of how Canadian banks navigated global opportunities while maintaining focus on domestic markets. The decision to hold a sizable stake in Elbit Systems through its asset management arm, even as public concerns about the company’s role in regional conflicts generated debate, highlighted the complex risk/return calculus that large financial institutions must perform. The reduction from over two million to just over half a million shares by year-end reflected a portfolio approach that emphasizes diversification and risk-management discipline, rather than a broad condemnation of the company’s activities. Such moves underscored the reality that modern banks must balance geopolitical risk, client expectations, and governance standards as part of a sophisticated asset-management strategy. Taken together, the market leadership and strategic positioning narrative of 2024 pointed to a sector where scale, execution excellence, proactive risk management, and disciplined governance would be the primary drivers of value creation in 2025.

Regulatory and Policy Developments

A critical dimension shaping the sector’s trajectory in 2024 was the policy and regulatory environment governing consumer credit and lending practices. A major development concerned the legal cap on interest rates charged by lenders. The industry runs on a framework in which the maximum legal rate is determined by an effective annual rate that factors in compounding, currently at 60 percent. In a move intended to better protect consumers from excessively high borrowing costs and to curb predatory lending practices, the federal government advanced regulations aimed at lowering this rate cap to 35 percent APR. This regulatory reform also introduced new restrictions on payday loans, reflecting a broader push to modernize Canada’s consumer lending rules and to tighten oversight of high-cost lending products. The changes were scheduled to take effect on January 1 of the following year, signaling a significant recalibration of the consumer credit landscape that banks would need to absorb in their pricing strategies, product development, and risk management models.

The regulatory shift toward a lower APR cap was part of a broader government initiative to tighten the rules around high-cost lending while preserving access to credit for consumers who rely on these financing options. Banks anticipated a range of implications from the cap, including potential adjustments to the pricing of credit products, changes in the structure of payback terms, and the need for enhanced affordability checks in loan underwriting. The net effect on banks would likely depend on how aggressively lenders reprice risk, manage portfolio mix, and deploy alternative financing solutions that remain compliant with the new framework. In addition to the APR cap, the regulation’s focus on payday lending signaled a broader trend toward tightening access to high-cost credit and enforcing more stringent oversight on products that have traditionally served as bridges for consumers facing short-term liquidity constraints.

Across the broader policy environment, the year’s developments also included ongoing attention to consumer protection and financial stability. Regulators emphasized the importance of prudent lending standards, accurate disclosures, and robust compliance programs to ensure that lending practices did not contribute to systemic risk or unsustainable household leverage. Banks responded by reinforcing governance around product design, pricing, and customer communications, aiming to balance the dual imperatives of profitability and consumer safeguards. The regulatory momentum of 2024 thus created a frame in which lenders would need to demonstrate continued commitment to responsible lending, transparent customer practices, and proactive risk management while pursuing growth opportunities in a market that remained highly competitive and rapidly evolving.

In parallel with domestic policy changes, the international policy and economic environment subtly influenced the sector. U.S. rate dynamics and expectations for Federal Reserve cuts interacted with Canada’s own policy trajectory, shaping cross-border funding costs, currency movements, and relative pricing for wholesale and retail products. The modest pace of U.S. rate reductions underscored a global landscape in which Canada could pursue a relatively stronger easing path, further supported by a softer domestic growth outlook that aligned with the BoC’s assessment of inflation and portended a favorable environment for loan growth and improved net interest margins in 2025. Taken together, Canada’s regulatory reforms, domestic policy actions, and international monetary policy signals created a multi-layered backdrop that banks would navigate as they executed on strategic plans, balanced risk, and pursued growth opportunities in a changing financial services ecosystem.

Conclusion

The Canadian financial sector in 2024 emerged as a story of resilience, strategic evolution, and disciplined risk management. The Big Six banks delivered robust profitability amid a high-rate environment, supported by diversified revenue streams and effective cost controls, while maintaining focus on prudent lending standards. The year’s rate trajectory—culminating in a 3.25 percent BoC target rate at year-end, alongside expectations for continued easing in 2025—helped drive more favorable funding costs and improved net interest income, setting the stage for stronger growth in the year ahead. Delinquencies, though trending higher from historic lows, remained within manageable bounds, reflecting the sector’s overall resilience and the effectiveness of risk-monitoring and response strategies. The acquisition of HSBC Canada by RBC emerged as a watershed event that amplified scale, reshaped competition, and underscored the strategic importance of well-integrated platforms in delivering superior client experiences and cross-sell opportunities. The deployment of capital and the management of assets in the wake of this deal highlighted the sector’s capability to translate strategic moves into tangible earnings enhancement and shareholder value.

Market leadership and investor confidence were shaped by a mix of profitability, strategic execution, and governance considerations. RBC’s market capitalization, among the highest in the sector, reflected its dominant market position and its ability to realize value from scale, acquisitions, and diversified revenue streams. The alignment of leadership and governance with strategic goals—evidenced by leadership transitions in some institutions and governance considerations in others—emphasized the continued importance of strong leadership in navigating a complex regulatory and market environment. The sector’s exposure to environmental finance through fossil-fuel funding and its ongoing pivot toward renewable energy funding highlighted a dual-path strategy that balances client needs with long-term sustainability objectives. The regulatory reforms around APR caps and payday lending set the framework for responsible lending practices that could influence product design, pricing, and accessibility for consumers, while also safeguarding financial stability.

Looking ahead to 2025, the sector appears poised to translate profitability into durable value, with expectations of further rate reductions, continued growth in loan and deposit volumes, and ongoing strategic consolidation where appropriate. Banks are likely to accelerate the integration of large-scale acquisitions, optimize digital and advisory capabilities, and expand into new product areas that align with evolving consumer needs and regulatory expectations. The combined effect of macro support from central banks, a balanced risk environment, and steady consumer demand positions Canada’s banking industry to sustain earnings momentum and deliver enhanced value to shareholders, customers, and the broader economy. As the year ends, the market’s focus remains on how well institutions execute their strategic plans, manage risk, and adapt to a shifting policy landscape—factors that will shape the trajectory of Canada’s financial sector well into 2025 and beyond.