Canadian banks increased non-interest expenses in the third quarter as investment in technology and personnel drove up costs. 

The $1.4 trillion Royal Bank of Canada (RBC) increased its non-interest expenses 22% year over year to $5.8 billion; $312 billion National Bank of Canada (NBC) grew its non-interest expenses 8% YoY to $3.3 billion; and $923 billion Bank of Montreal’s (BMO) non-interest expenses soared 32% to $3.7 billion. 

“Increase in expenses were investments in technology to support client acquisitions, enhance our client experience and improve efficiency,” NBC Chief Financial Officer Marie Chantal Gingras said during the bank’s Q3 earnings call last week.  

Investing in AI

As the banks find value in increased spending in Q3, they may benefit in future quarters from investing in AI, according to last week’s RBC Survey on AI for financial intelligence. 

According to the report, which surveyed 1,501 Canadians, 71% of respondents aged 18-34 find AI useful in automating savings and one-third of Canadians said they are likely to use an AI-powered app to manage their finances. 

RBC, for one, continues to develop and innovate in areas of responsible AI to keep up with client needs, according to the report. 

“It’s never been more important that we continue to enable secure, fair, ethical and trusted AI products, especially in banking,” Alex LaPlante, interim head of Borealis AI, a research center backed by RBC, said in the report.  

Q3 non-interest expenses:

Digital engagement 

The number of active digital users and mobile users increased at RBC and BMO during Q3.  

At RBC, mobile users increased 11% YoY to 6,639 and active digital usership grew 7% YoY to 8,837, according to the bank’s earnings supplement.  

At BMO, digital engagement in retail channels increased 7% YoY to 3.8 million and digital engagement in commercial banking channels jumped 8% YoY to 256,000.  

Personnel costs

As non-interest expenses increased across the board, investment in staff contributed to the influx in spending during the quarter. 

RBC’s on-interest expenses increased 22% to $5.8 billion in Q3 as equipment, technology and professional fees bumped up the spend, according to the bank’s earnings presentation. 

“The core drivers of organic expense growth were investments in people and technology,” Nadine Ahn, chief financial officer of RBC, said during the bank’s Q3 earnings call on Aug. 24.   

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