Leaner times expected for financial services

Property and casualty insurers are a bright spot, Guardian's Ted Macklin says.

Sonita Horvitch 29 September, 2010 | 6:00PM
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 Ted Macklin, managing director of Toronto-based Guardian Capital LP, says that while Canada's leading financial institutions are of high quality, their future earnings growth is likely to be restrained.

The Canadian banks are, he says, experiencing more moderate loan growth. "There appears to be reluctance by both individuals and companies, in particular, to borrow." Also, in the wake of the financial meltdown, the banks have reduced their off-balance-sheet business, which included controversial structured financial products. "This reduction has resulted in a loss of what was an important source of revenue and earnings growth for them," says Macklin.

Turning to the major life-insurance companies, Macklin says that some are "facing significant headwinds when it comes to earnings growth." He notes that the life companies may be operating in a tougher regulatory environment, and that they are sensitive to stock-market fluctuations and remain vulnerable to a severe market downturn. Also, "they are feeling the pinch from low interest rates, which are adversely affecting their profitability, due to required reserve increases."

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Sonita Horvitch

Sonita Horvitch  

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