Banks in Canada have performed well since the last recession, according to such indicators as income, revenue growth, reserves, and balance sheets, but whether they can begin to compete in the ongoing consolidation in the global arena remains to be seen, says a new Standard & Poor’s report.

“Although all the country’s major banks have shown a positive trend in income and revenue growth, there remains a concern that the Canadian banks have fallen behind their global peer group as measured by profitability, liquidity, capital, size, and scale,” says Lidia Parfeniuk, a credit analyst with Standard & Poor’s financial institutions ratings group.


The report, Bank Industry Risk Analysis: Canada, notes that other issues for the industry include overcapacity, very competitive retail pricing, and customer concentration in wholesale lending.

In addition, with their relatively smaller size and infrastructure, Canadian capital market dealers do not enjoy the distribution channels of their American and European counterparts that are necessary for large global debt and equity clients.

Canadian banks must grow if they are to remain competitive with banks elsewhere. Some are currently looking to expand into the U.S., but the weakening Canadian dollar makes the American arena expensive and risky.