Financial results

The global economic environment in 2017 was defined by strong growth across almost all major economies in the world. Despite increased concerns over trade protectionism, the International Monetary Fund expects this strong global growth to produce a 4.2% increase in the volume of global trade in goods and services in 2017, up from 2.4% in 2016.

With signs of growth, central banks continued along the path of normalizing monetary policy. In the United States, the Federal Reserve increased its benchmark rate three times in 2017, pushing the upper limit of the federal funds rate from 0.75% at the start of the year, to 1.50% by the end. This was the first time that the Federal Reserve has raised interest rates multiple times in a single year since 2006. Putting additional pressure on interest rates was the October announcement that the Federal Reserve will begin slowly unwinding the $4.5 trillion balance sheet it amassed during its post-recession period of quantitative easing.

While the Federal Reserve was a leader in increasing interest rates, the European Central Bank announced plans to begin tapering its program of quantitative easing in January 2018.

The global outlook, coupled with a strong domestic economy, led the Bank of Canada to increase interest rates for the first time in more than seven years in mid-2017. A second interest rate hike followed in September and strong macroeconomic data set the stage and market expectations for further tightening, which occurred in January 2018. A strong rebound in Canadian exports in the fourth quarter of 2017 was part of this influential data. After reaching record levels in May, Canadian exports weakened sharply through mid-2017. However, stronger global commodity prices and a return to more normal production levels in the automotive industry led exports to rebound in the fourth quarter and set the stage for the nominal value of Canadian exports to grow by nearly 7% in 2017 compared to the prior year.

Export growth arose even though the Canadian dollar averaged nearly two cents stronger than 2016. The value of the Canadian dollar was also 3.0% stronger against Canada’s other major trading partners in 2017 as measured by the Bank of Canada’s Canadian dollar effective exchange rate. The value of the U.S. dollar against the Canadian dollar strongly influences our results as our loans are primarily denominated in U.S. dollars.

Our net income for the year was $997 million, a decrease of $75 million when compared with 2016.