Pressure On Corporations To Make Profits

Corporations report their earnings every period, 3 months. With that, the analysts expectations or street expectations, which will be made public, of what the revenue and earnings will be is based on the previous period’s, 3 months ago, revenue and earnings.

Since the big banks beat the expectations and increased the dividend payout, it can be assumed that the big banks can withstand a low interest rate environment and continue to grow organically and/or inorganically.  Furthermore, beating the analysts expectations can result in a higher growth expectation for the next period.

Watching the banks in Canada, I am unsure how much longer they can continue to grow by catering to more clients.  If the Canadian banks cannot increase revenue by selling more products to more customers, there are other options.  One of the key indicators I look for when it comes to growth is the loss of jobs.  A corporation that is reducing the workforce may have trouble increasing revenue.  Therefore, to increase earnings, the corporation is using an inorganic growth menthod.  Reducing expenses.

An analyst did say that with the rise of Internet banking, the big banks will have to greatly reduce the number of staff and embrace technology to minimize expenses.  If they don’t, they may become the next Woolworth, Woodwards, BlockBuster video store or Zellers since the younger generations do their banking on the Internet.

Corporation pressured to meet or beat earnings expectations

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