TORONTO, Apr 12 (Reuters): Canada's biggest banks started fiscal 2022 on a hiring spree, adding staff despite a tight labour market, especially to boost digital capabilities.
Their expansion in the midst of surging inflation could threaten profit margins, particularly as higher interest rates weigh on loan volumes.
"It's a Catch-22," said Avenue Investment Management portfolio manager Bryden Teich. From a short-term profitability perspective, "you don't want them aggressively growing their costs at this part of the economic cycle."
But not adding staff when clients are seeking more advice and personalized solutions and better digital offerings would hurt longer-term growth, he added.
The top five banks had increased their Canadian full-time equivalent positions to a record 171,730 in the first quarter of fiscal 2022, up 4.3 per cent from a year ago for the fastest pace in at least three years, according to Reuters' analysis of the banks' statements.
The unemployment rate in the finance, insurance and real estate industries was at a record low 1% in March, the lowest of any industry in Canada.
Carolyn Hamer, partner at Deloitte focused on workforce-related issues, said the banks are trying to plug the digital gaps they recognized during the pandemic and are starting to get more aggressive as they compete with large technology firms.
Bank of Montreal, whose Canadian workforce grew by 7.5 per cent, the fastest of the major lenders, has been expanding its technology operations and personal and commercial banking, said Karen Collins, its chief talent officer.
Digital channels now account for more than a third of sales, and 90 per cent of self-serve transactions happen outside branches, primarly online, so BMO wants to improve technology infrastructure and replace routine branch services with more advisory offerings, Collins said.
