Aug 24, 2022
RBC sees $10B influx into GICs as return rates jump
RBC Q3 profit misses expectations
There’s more evidence that higher return rates and the security of Guaranteed Investment Certificates (GICs) have captured investors’ attention amid recent market volatility.
Executives at Royal Bank of Canada said they have seen billions of dollars flowing into GIC products during its fiscal third quarter.
“We've had about over $10 billion that has been pushed into the GIC book,” Nadine Ahn, chief financial officer at RBC, said during the company’s conference call with analysts to discuss the bank’s latest quarterly results Wednesday.
“When we look at other consumer credit, we are still in a position where we see high liquidity, and consumer accounts growth is slowing as you look at things like the chequing account, where we've seen a lot of liquidity pushed into our GIC book.”
After years of meagre returns, GICs have made a comeback as their return rates surge alongside benchmark interest rates. Many one-year GICs now offer return rates at or above four per cent.
Ahn said Canadian retail investors pulled a net total of $4 billion out of the bank’s equity and fixed-income funds in the most recent quarter because of the elevated market volatility, but added that a “good part” of that money flowed into GICs.
RBC substantially missed profit estimates in its fiscal third quarter as its capital markets division dragged on the bottom line and the bank built up its cash on hand to handle loans that could potentially go bad.
“In terms of the sort of risk-off stance of the mass retail investor between rates and the market uncertainty, they are looking for a guaranteed preservation of capital and now have incentive in terms of the GIC product,” Neil McLaughlin, RBC’s group head of personal and commercial banking, said on the call.