Mackenzie Minute: September 15, 2017
Graham Meagher, Associate Portfolio Manager with the Mackenzie Ivy Team, looks at issues facing Canadian banks, including rate hikes and new technology.
GRAHAM MEAGHER: Recently, the Bank of Canada raised interest rates by 25 basis points. That was the second hike this summer and rates are now 1%. Now at Ivy, we are supportive of a more normalized interest-rate environment, especially given the high consumer debt levels. In terms of the Ivy portfolios, the most obvious impact is to the Canadian banks. And, historically, a rate hike has been supportive of lending margins although there are other factors at play, including competition, credit losses and debt levels.
We think the bigger issue is the accelerating pace of technological change. And for the banks that’s not just the shiny new app that can take a picture of your cheque or track your expenses, although those are good things. We think it’s an opportunity to look at the end-to-end processes and using new software, automation and artificial intelligence to really bring those costs down, create more customized products and services and a more personalized advice experience.
At Ivy, we are long-term investors, so we look for quality companies that have the culture and the foresight to invest and innovate for the future and really re-invest in that value proposition and build trust with clients, which we think are two advantages the banks have over new entrants.