B2B Bank was not immune from the leverage loan phobia in the wake of the 2008 stock crisis. Yet Laurentian Bank Financial Group President & CEO, François Desjardins, thinks the worst may be over.
After a downturn in 2008, the bank saw RRSPs and investment in general rebound. He said the bank informed clients of leverage risks, emphasizing that they could transform their lending capacity into an asset to fuel portfolio growth,” Desjardins said when interviewed on February 12.
More and more clients were borrowing to maximize their contributions this RRSP season, up to the allowed limit, he added.
To help clients take advantage of unused room in tax-free savings accounts, the bank launched a TFSA loan. The cumulative TFSA contribution room for 2020 was $69,500. The federal government introduced this savings account in 2009. The annual limit for 2020 is $6,000, unchanged from 2019.
RRSP and TFSA loans are piquing independent advisors’ interest. Desjardins points out that they are a good vehicle for systematic savings, inspired by long-term life insurance products sold by the bank.
Personal loans falter
On another front, difficult union negotiations in 2019 forced Laurentian Bank to slow the growth of all personal lending, including loans granted by B2B Bank.
In the president’s message of the 2019 annual report, Desjardins explained that the objective was to shore up liquidity in case of a labour conflict.
Personal loans declined to 14% of the bank’s portfolio in 2019, from 23% in 2015. During this period, the share of corporate loans climbed from 27% to 38%, as home mortgage loans slipped from 50% to 48%.
In total, personal loans totalled $20.7 billion in 2019. He says he would like to boost this amount to $22.5 billion in 2022, equal to a 9% increase.
This article is a magazine supplement. To consult the C-Suite Interview with François Desjardins published in the April 2020 edition of Insurance Journal, click here.
