Fast facts

  • The majority of Canadians are shareholders in Canada’s banks
  • 85 per cent of Canadians have favourable views of Canadian banks
  • 83 per cent of Canadians give banks a good performance rating when it comes to being stable and secure

The bottom line

When banks are profitable, they are stable. When banks succeed, the economy and communities prosper.

A profitable banking industry works for Canada and Canadians. Banks provide jobs directly and indirectly, create tax revenues, distributes dividend payments and donate to charities in Canada and worldwide. Profits also expand the capital base of banks, which in turn maintains the stability of the system, ensuring the safety and security of Canadians’ deposits.

What is the difference between revenues and profits?

Revenues are generated from the selling of a business’ products and services before expenses and taxes. Profit, also known as net income, is left after setting aside funds for credit losses and accounting for expenses and taxes. The six largest banks’ net income in 2015 was $34.9 billion.

revenues - provisions for credit losses - expenses - taxes = profits

Where do bank profits come from?

Banks are involved in many business lines, such as personal and commercial banking, capital markets, wealth management and insurance, generating revenue from a variety of businesses.

This variety helps yield positive and stable financial results, which makes for a safe and secure banking sector that contributes significantly to Canada’s economy.

Banks categorize their revenue into two broad areas based on how it is generated – net interest income and non-interest income.

Net interest income is generated from what is known as the ‘spread’. The spread is simply the difference between the interest a bank earns on loans extended to customers and the interest paid to depositors and other creditors for the use of their money. Fifty-six per cent of bank revenue earned is net interest income.

Non-interest income accounts for 44 per cent of bank revenues. Banks earn this by providing a variety of value-added services, including trading of securities, assisting companies to issue new equity financing, commissions on securities and wealth management. Personal service fees for bank accounts make up about five per cent of total revenues. The fee for a particular service is based on the cost of providing that service, staff time, technology and safety measures for any risks involved and the value-added benefit the customer receives

Added together, net interest income and non-interest income form total revenue. From total revenue, a number of items are subtracted, including expenses for its staff, locations, equipment and technology. Taxes must also be paid out of total revenues.

Net income (after expenses and taxes) is used, among other things, to:

  • Expand the capital base of the bank;
  • Make investments to improve the bank;
  • Pay dividends to shareholders; and,
  • Make acquisitions.

chart showing how banks make money, how revenues are utilized and the distribution of net income

Who benefits from profitable banks?

Canadians do. The banking industry is a success story and its profitability is very important both to our economy and to individual Canadians.

  • Banks and their subsidiaries contribute significantly to job creation and to the Canadian labour market, employing 280,000 employees in Canada.
  • Canada’s six largest banks paid $7.3 billion in taxes in Canada in 2015 to all levels of government.1
  • The majority of Canadians are shareholders in Canadian banks either directly through share ownership or indirectly through pension and mutual funds, including the Canada Pension Plan (CPP). Pension funds and RRSPs are some of the main beneficiaries of the billions of dollars that the banks pay in dividends each year.
  • Suppliers to the banks, including businesses of all sizes, all over Canada and the world. Banks made purchases from outside suppliers totaling about $18.9 billion in 2015.
  • Banks and their employees are also among Canada's top corporate donors and have a long tradition of community participation. Canada’s charities and non-profit community groups receive multi-million dollar support from banks and every year thousands of bank employees at all levels donate their time and talent to charitable initiatives. These contributions help support a broad range of programs, particularly in the areas of education, the arts, youth, the environment, disaster relief and health care.

Canadians value a strong banking sector

Canadians value a strong and profitable banking sector and are justifiably proud of their banks for their continued strength and stability. Recent polling2 found that:

  • 85 per cent of Canadians have favourable views of Canadian banks – a number that has increased by a remarkable 20 percentage points in recent years. Eighty-three per cent of Canadians give banks a good performance rating when it comes to being stable and secure.
  • When rating the performance of Canadian banks, 82 per cent of Canadians give banks a good to excellent rating on protecting the privacy of their personal information and transactions and 73 per cent agree that banks are good at introducing new technologies that improve the convenience of banking.
  • Two-thirds of Canadians (61%) say that having profitable banks means more jobs, better pension plan returns and a healthier economy.

The bottom line: when banks are profitable, they are stable. Canadians value knowing their banks are trustworthy and reliable. When banks succeed, the economy and communities prosper.

1 CBA Tax Statistics, Estimates
2 All data from public opinion research conducted by Abacus Data on behalf of the Canadian Bankers Association, December 2016, except where stated.