Educational Disclaimer: Maple Wealth Guide provides general financial education only. We do not offer financial, investment, tax, or legal advice. Nothing on this website should be considered a recommendation. Always consult a licensed professional for personalized guidance.
The Big Five
Canada's banking sector is dominated by five major banks: Royal Bank (RBC), TD Bank, Bank of Nova Scotia (Scotiabank), Bank of Montreal (BMO), and Canadian Imperial Bank of Commerce (CIBC).
Together, they hold over 85% of Canadian banking assets and have paid uninterrupted dividends for over 100 years.
Revenue Streams
Net Interest Income
The primary profit source. Banks pay you interest on deposits and charge higher interest on loans. The difference—the "spread"—is profit. This includes mortgages, credit cards, lines of credit, and business loans.
Fees and Commissions
Banks charge for many services:
- Account maintenance fees
- Transaction fees
- Credit card interchange fees
- Mortgage origination fees
- Wire transfer fees
Wealth Management
Managing investments for clients generates substantial fees. Banks own major mutual fund companies and brokerage operations. Those 1-2% MER fees on mutual funds? Much of that goes to bank profits.
Insurance Operations
Several banks have significant insurance businesses, adding diversification to their revenue mix.
Why Canadian Banks Are Different
- Oligopoly structure — Limited competition protects profits
- Regulatory protection — High barriers to entry
- Conservative lending — Stricter mortgage rules than the US
- Diversified operations — Multiple revenue streams
- International expansion — Growing presence outside Canada
💡 Note: Canadian banks weathered the 2008 financial crisis better than most global peers because of stricter regulation and more conservative lending practices.
Banks as Investments
For dividend-focused investors, Canadian banks offer:
- Reliable, growing dividends
- Dividend yields typically 3-5%
- Long track records of dividend increases
- Eligible for the dividend tax credit
The Risks
Banks aren't without risk. They're sensitive to interest rate changes, housing market health, and economic conditions. Heavy concentration in Canadian banks also means concentrated risk—diversify beyond just financial stocks.
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About Maple Wealth Guide
Maple Wealth Guide is an independent Canadian financial education website. Our team of educational writers researches and explains investment concepts, retirement-related topics, and personal finance information for Canadians aged 50 and over. We are not licensed financial advisors and do not provide personalized recommendations. All content is for educational purposes only.