Canada's big banks weathering the storm as credit strain mounts
Canada’s largest banks took higher provisions for credit losses and classified more loans as impaired in their fiscal first quarters, but showed resilience in other areas, an indication that the country’s lenders are weathering a softening economy brought on by higher interest rates.
The quarterly results, released this week, showed some of the banks improved performance through cost-cutting and were able to blunt the impact of the higher provisions with loan and deposit growth.
On Thursday, Toronto-Dominion Bank was the latest of the big banks to beat analyst expectations, joining Bank of Nova Scotia, Royal Bank of Canada, National Bank of Canada and Canadian Imperial Bank of Commerce (CIBC).
“Margin performance has stabilized and efficiency metrics have improved,” National Bank Financial analyst Gabriel Dechaine said in a March 1 note to clients about the sector’s results. But, he added, “the biggest source of uncertainty is still the credit cycle.”
RBC reported total bank provisions for credit losses of $813 million, more than the $754 million analysts had forecast, and provisions for credit losses on impaired loans of $685 million, which were attributed to the impact of higher interest rates and rising unemployment.
But Royal was also among the banks to report growth in loans and deposits in its domestic personal and commercial banking division. Canada’s largest bank reported average deposit volume growth of nine per cent, including 11 per cent in personal deposits, and five per cent growth in loans including double-digit growth in business lending and credit cards.
And while Toronto-Dominion Bank posted a provision for credit loss ratio of 0.44 per cent, higher than analyst expectations of a 0.40 per cent ratio and
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