‘We've averted a recession’: What senior bank executives are saying about the economy

financialpost.com:

Senior executives from Canada’s biggest banks were in New York this week for the RBC Capital Markets Financial Institutions Conference, where they addressed issues ranging from the financial health of consumers to interest rates and credit quality. The Financial Post’s Denise Paglinawan rounds up some of the highlights.

Royal Bank of Canada chief executive Dave McKay has noted previously that mortgage payment shock was the main culprit for Canada’s economic underperformance when compared to its neighbour to the south, but this week he noted that other developed economies are in a similar boat. The U.K and Australian economies are also slowing from softer consumer demand caused by higher interest rates, in large part because mortgage debt is being repriced there while in the U.S., where 30-year fixed mortgage terms are the norm, debt is not rolling over. McKay said on March 5 Canadian banks are repricing roughly 15 per cent of their “back book” of existing mortgage clients, a fairly significant shock that is pulling disposable income back from the consumer.

Toronto-Dominion Bank chief financial officer Kelvin Tran also said he’s seeing a change in consumer behaviour in which they adjust their spending based on their debt to service ratio. “You actually see them adjusting their behaviour or spending less, holding more cash cushion,” he said on March 6. Tran said consumers from the last 12 months have been taking action, either by paying a lump sum down or increasing their payments to get ahead of potential debt issues.

Hratch Panossian, chief financial officer at Canadian Imperial Bank of Commerce, said that over the last couple of quarters, delinquencies are starting to come up in mortgage portfolios across the industry.