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The Financial Health of Canadian Households
 

The Financial Health of Canadian Households

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A description of financial health of Canadian households mainly using data from Ipsos Reid's Canadian Financial Monitor survey.

A description of financial health of Canadian households mainly using data from Ipsos Reid's Canadian Financial Monitor survey.

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    The Financial Health of Canadian Households The Financial Health of Canadian Households Presentation Transcript

    • The Financial Health and Banking Channel Usage of Canadian Households April 8, 2009 Canadian Financial Monitor
    • The Canadian economy is weakening. According to RBC Economics Research, a rebound in economic growth is anticipated in the second half of 2009 and will continue to gain strength into 2010. 5 Real GDP 4 3 Annual % Change 2 1 0 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 -1 -2 -3 -4 Source: Statistics Canada (Q1’07 to Q4’08) RBC Economics Research (Q1’09 to Q4’10) Canadian Financial Monitor 2
    • Despite all the negative numbers, Canada is still expected to be in a better position than many other nations during this global economic crisis. GDP % Change Previous Year -3 -2 -1 0 1 2 2009** United Kingdom Japan Germany Italy France United States Canada 2010** Source: IMF. **Forecast. And while more Canadians have lost their jobs, unemployment rates are still higher in many other developed countries. France 8.1% Germ any 7.2% United 7.2% States Italy 6.7%* Canada 6.6% United 6.3% Kingdom Japan 4.5% * The chart above shows unemployment rate in Dec. 2008 for all countries except Italy data in Sep. 2008. Source: OECD and Bloomberg. Picture: TopNews.in Canadian Financial Monitor 3
    • How has the economic downturn impacted the financial health of Canadian households? Canadian Financial Monitor 4
    • $400,000 Net Worth = Total Assets – Total Debt $350,000 $300,000 The wealth of Canadians (i.e. household net worth) has ceased growing. After 4 years of $250,000 steady growth, average household net worth has $200,000 declined for 2 consecutive years starting in $150,000 2007. $100,000 $50,000 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Average Canadian Household Net Worth Net Worth = Total Assets – Total Debt Much of the wealth loss happened in the last $259,673 $258,833 quarter of 2008. After reaching a high in Q2’08, average household net worth dropped $248,654 $248,705 by 4% over the next two quarters. Q1'08 Q2'08 Q3'08 Q4'08 Average Canadian Household Net Worth Canadian Financial Monitor 5
    • A break down of the assets held by Canadians - % share of dollars – Total 2008 Average Market Value of Total Assets $312,172 7 Real estate remains the single 31 biggest asset held by most Canadians. 62 Total Households Real Estate Investable Assets Automobiles It has provided home owners with some protection from the stock Non Investable Household market meltdown; percentage Net Worth Assets Investable Debt declines 2007 to 2008 on real estate % change - 2008 vs 2007 Assets (non investable assets) have offset Total Households -1 -11 7 5 declines in investable assets. Net Worth = Total Assets – Total Debt Investable Assets = Chequing/Savings, GICs, Bonds, Stocks and Mutual Funds Non Investable Assets = Real Estate and Automobiles Debt = Credit Cards, Mortgages, Loans and Lines of Credit Canadian Financial Monitor 6
    • $100,000 $90,000 Over the past 10 years, Canadians have $80,000 accumulated debt at a higher rate than $70,000 income growth. Average household debt has $60,000 increased by 44% over the past 10 years $50,000 $40,000 whereas household income grew by only $30,000 28% over the same period. $20,000 $10,000 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Average Household Debt Average Household Income % of Households 55 54 53 53 The percentage of Canadians who are 51 Heavy Borrowers is increasing. This suggests that the increase in overall consumer debt is being driven by Heavy 25 25 25 25 25 20 22 21 22 24 Borrowers. Debt Free Light Borrowers (Households with < Heavy Borrowers (Households with $100,000 in debt) $100,000 or more in debt) 2004 2005 2006 2007 2008 Canadian Financial Monitor 7
    • Average Outstanding Balance (000’s) $125 $116 Much of the rise in overall household debt is $95 $104 $107 being driven by mortgages. Over the past few years, Canadians have taken out increasingly larger mortgages; the average mortgage balance has increased by almost $29 $32 $32 $31 1/3 in the past 4 years. $18 $19 $18 $18 $19 $24 $11 $11 $12 $11 $11 $5 $5 $6 $6 $6 Credit Cards Mortgages Loans Secured LOC Unsecured LOC 2004 2005 2006 2007 2008 Canadian Financial Monitor 8
    • How are Canadians reacting to the economic slowdown? Like others around the world, we are cutting household spending. Cut back on household spending, % yes South Korea 87% Argentina 84% Turkey 84% Mexico 83% France 81% China 80% United States 80% Great Britain 77% Brazil 76% India 76% Australia 75% Italy 75% Russia 73% Japan 73% Total 72% Canada 70% Belgium 70% Poland 68% Spain 68% Czech Republic 59% Germany 59% Sweden 52% Netherlands 45% Source: Ipsos Global Economic Meltdown; a poll of 22 Countries; December 2008 Q. Given the current state of the global economy, have you and your family had to cut back in your household spending recently? Canadian Financial Monitor 9
    • Much of the reduction in consumer spending is on entertainment, vacations and luxury items. % cutting back – average of all countries Entertainment 76% Vacations 73% Luxury Items 72% Clothing 59% Energy Consumption 53% Gasoline/Driving 47% Groceries 41% Cell Phone 33% Cable TV 23% Education 11% Source: Ipsos Global Economic Meltdown; a poll of 22 Countries; December 2008 Q. What are the specific things that you and your family are cutting back on these days? Base: respondents who have cut back Canadian Financial Monitor 10
    • Average monthly expenditure $177 $169 $155 $151 $153 $165 $131 $132 While the average monthly expenditure has $107 $91 $97 $81 declined … Eating out (Restaurants/Bars) Recreation (eg. movies, concerts, Clothing/Footwear sporting events) Q1'08 Q2'08 Q3'08 Q4'08 % of Households who have spent money on 88 90 91 91 70 76 78 79 … the frequency of eating out, attending 55 56 59 56 movies, concerts or sporting events and purchases of clothing or footwear has remained relatively unchanged. Eating out (Restaurants/Bars) Recreation (eg. movies, concerts, sporting events) Clothing/Footwear Canadian Financial Monitor 11
    • I am confident that the financial institutions I deal with have the financial strength to survive in the current financial climate % strongly agree (top 3 box on a 10 point scale) 51 49 46 46 39 Canadians still have a high level of confidence towards their financial institutions. This is especially true amongst older Canadians. Total Households Under 35 35 to 49 50 to 64 >=65 * Source: Ipsos’s Market Now (Field work conducted between January 1 and 14, 2009). Canadian Financial Monitor 12
    • This chart shows the incidence of Canadians using the various channels over the past month. 100 90 The percentage of Canadians banking online is 80 70 approaching 60% and is almost as widely used as 60 50 Tellers. 40 30 20 10 0 2000 2002 2004 2006 2008 Teller ABM Online Banking Phone Banking 48 49 43 38 37 33 And the of Canadians using 3 or more channels continues to steadily increase. 16 13 12 1 Only 2 Only 3 or more 2004 2006 2008 Canadian Financial Monitor 13
    • The information in this report primarily comes from Ipsos Canada’s Canadian Financial Monitor. The Canadian Financial Monitor (CFM) was launched in 1999 to address a market need for an all encompassing study to track the ongoing financial health, product holdings, banking habits, household expenditures and attitudes of Canadians. Results for CFM are collected from a large sample of 12,000 representative Canadian households. Information is collected on a monthly basis using a mail diary. CFM captures a wide array of products including Chequing, Savings, GICs, Bonds, Stocks, Mutual Funds, Credit Cards, Mortgages, Loans, Lines of Credit, Life Insurance, Car and Home Insurance and Specialty Insurance. The channel usage habits (i.e. Online, Phone, ABM, Teller), attitudes and sentiments of Canadians are also monitored. Canadian Financial Monitor 14
    • CFM is a large study (actual sample size for 2008) Total Canada = 12,004 Toronto = 1,519 Montreal = 1,400 Vancouver = 672 BC Alb Sask Man Ont Que Atl 1,643 1,120 463 554 4,418 2,805 1,001 Canadian Financial Monitor 15
    • For more information about this presentation, please contact Michael Hsu Ipsos Reid Corporation 416-572-4406 michael.hsu@ipsos.com © 2009 Ipsos – All rights reserved. This report constitutes the sole and exclusive property of Ipsos. Ipsos retains all copyrights and other rights over, without limitation, Ipsos' trademarks, technologies, methodologies, analyses and know how included or arising out of this report. The addressee of this report undertakes to maintain it confidential and not to disclose all or part of its content to any third party without the prior written consent of Ipsos. The addressee undertakes to use this report solely for its own needs (and the needs of its affiliated companies as the case may be), only for the purpose of evaluating the report for services of Ipsos. No other use is permitted. Canadian Financial Monitor 16