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Post says Big Six banks mull options on extra cash

2021-06-11 09:23 ET - In the News

See In the News (C-RY) Royal Bank of Canada

The Financial Post reports in its Friday edition that Canada's six biggest banks are sitting on billions of dollars in extra capital as the pandemic unwinds, and investors are wondering how the lenders intend to use those stashes of cash. The Post's Stefanie Marotta writes that the largest lenders have tucked away $40.5-billion in excess Tier 1 (CET1) capital as of April 30. CET1 capital is a fund of securities that regulators require banks to set aside during periods of economic strength as a shock absorber in a potential financial crisis. When COVID-19 hit last year, the banks started stockpiling billions to help them weather any losses. Canada's banking regulator even forced them to halt dividend increases and share buybacks. Ultimately, the pandemic did not put as much pressure on the banks as expected. The Big Six internally target an 11-per-cent CET1 ratio, but the lenders have barrelled past that marker, booking an average 12.8-per-cent ratio with a combined total of $270.6-billion in CET1 capital -- the highest on record. The lenders could scoop up other companies or rivals, reinvest the funds into existing business, or send that money directly to shareholders by boosting dividend payments and share buybacks.

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