This was supposed to be the year that the bottom line of Canada's big banks would feel the pain of a weak economy, the slumping oilpatch, cautious consumers and low interest rates.
It didn't quite work out that way.
Fast forward to this week and the big six reported fourth-quarter earnings that in most cases topped last year's. Three banks even managed to boost their stock dividends.
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For the fiscal year as a whole, the six banks reported total earnings of almost $35 billion, with Royal Bank's record $10-billion profit leading a very healthy pack.
That eye-popping total represents a jump of almost five per cent from last year.
How did the banks manage that?
Expense management is the current mantra among bank executives these days. Staff numbers are being trimmed as the banks move to restructure their operations to make them more efficient.
At TD, for instance, the bank cut 1,594 jobs in the past year, while Scotiabank has dropped 1,140 staff since the end of July. Royal Bank reduced its full-time ranks by 528, mostly by not replacing workers who left.
But the black ink isn't simply due to cost controls. Banks with large U.S. banking operations have benefited, as Canada's lower dollar meant their U.S. earnings were worth even more. TD, for example, now has more branches in the U.S. than in Canada.
And most banks reported that their retail and business banking arms performed well as loan volumes rose and deposits grew. Wealth management and capital markets operations flourished, in most cases.
Banks also saved some money when they decided not to pass along all of the half-percentage-point cut the Bank of Canada made earlier this year in its key lending rate. Banks dropped their prime lending rates by a total of just 0.30 per cent.
And then there's everyone's favourite banking complaint — service fees. Most banks increased fees this year. The exact effect of those increases on profits, however, isn't clear.
Bumpy road ahead?
All of this is not to suggest that the banks face nothing but rosy profit pictures in the future.
In the West, commercial loans to oil and gas companies in Alberta will be watched closely in the wake of near record low oil prices and tens of thousands of layoffs in the industry.
At the Royal Bank, eight new companies in the energy sector have been added to its watch list. Chief risk officer Mark Hughes also says he's noticed a "slight upward trend" in delinquencies in auto loans and credit card accounts.
A report this week from the credit monitoring agency Equifax Canada found consumer loan delinquencies were rising in every province that has a large energy industry.
Questions abound about whether changes are coming to the mortgage world. There have been suggestions that Canada should consider requiring that banks cover a portion of the losses on insured mortgages (needed when home buyers have less than 20 per cent down). Currently, the Canada Mortgage and Housing Corporation and a few private insurers cover those claims, with Ottawa ultimately backing all mortgage default insurance.
The banks are facing other potential bumps in the earnings road. Canada's economic outlook for 2016 is hardly robust and growth forecasts have been ratcheted down.
John Aiken, a bank analyst at Barclays Capital, says he expects the weak outlook will translate into pressure next year on Royal Bank's domestic operations.
"When we look into 2016, it doesn't dissuade our thesis that there will be ongoing challenges," he said.
Facing these challenges, the banks are making hefty investments in technology to power their efficiency drives and protect their market share from new financial technology competitors, like Apple and Google.
"We're continuing to invest in our digital channels … and also to invest in automating and simplifying our processes," RBC chief financial officer Janice Fukakusa told analysts during the bank's conference call on Wednesday.
David Beattie, a senior bank analyst at Moody's Investor Services, noted last month that digitization, while costly up front, will produce payoffs for the banks down the road.
"They're getting to the point where they're really doing some substantive changes to the way they run their businesses," he said in a Canadian Press interview.
"Digitization is doing that anyway, but the pressure of low interest rates and spread compression and low revenue growth is just making it all that more critical."
Big banks' big profits ($B)
Fiscal 2015 Fiscal 2014
Royal Bank $10.03 $9.00
TD Bank $8.02 $7.88
Scotiabank $7.21 $7.30
BMO $4.41 $4.33
CIBC $3.59 $3.22
National Bank $1.62 $1.54
Total: $34.88B $33.27B