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COVID-19 has Canada’s banks worried about sickly loans

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If Canada’s big banks are the canary in the coal mine for the economy as a whole, then there was some good news this week, and some less good news.

While the COVID-19 pandemic wreaked havoc on Canadian society, Canada’s five biggest lenders — Royal Bank, Bank of Montreal, Scotiabank, CIBC and TD — remained profitable even as they set aside billions of dollars to offset possible losses from loans that might go bad in the coming months.

It was expected that measures to contain the pandemic, such as school and business closures, border shutdowns and travel restrictions, would grind economic activity to a halt, but the banks’ quarterly financial results for the three-month period up to April 30 were hotly anticipated because they are a deep dive into just how bad the economy was really doing.

If businesses like manufacturers, oil and gas companies, retailers and tech startups are having trouble paying their bills, that tends to show up at the big banks, which lend them money.

Analysts say one of the best ways of gauging how companies are doing is by paying attention to a banking metric known as loan loss provisions. That’s a complicated-sounding term for a fundamentally simple concept: how much banks set aside to pay for loans on their books they think might not get paid back.

Not all those loans will turn into losses. But paying attention to how much the banks are setting aside just in case is an excellent proxy for how worried they are.

Combined, Canada’s big five lenders set aside almost $11 billion last quarter to cover loans that aren’t currently being paid off as planned. That’s almost five times as much as they had set aside for bad loans in the same three-month period last year.

That’s the bad news. The good news? “They were bad, but not as bad as feared,” said Jim Shanahan, an analyst with investment firm Edward Jones who covers Canada’s big banks.

Considering the massive number of layoffs, business closures and the glacial pace of trade flows across the Canada-U.S. border due to COVID-19, there were fears that loan losses could have been “at levels that we would never have contemplated,” Shanahan said.

But that didn’t happen.

It’s equally important to note that even in all this, the banks are still making money. Collectively, the banks raked in nearly $5 billion in profits over the three months. That’s well below their usual pace, but Shanahan said there was “almost a collective sigh of relief” that the banks were still profitable.

Art Johnson, the founder of Calgary-based SmartBe Wealth, is one of the few money managers in Canada who doesn’t think shares in Canadian bank stocks are always worth buying, but even he admits their week went a lot better than it could have gone.

 

Canada’s big banks are proxies for the economy: when the people and businesses they lend to have financial problems, that tends to show up on the banks’ books. (David Donnelly/CBC)

 

“When I look at the numbers, they’re bad,” he said in an interview. “There’s no two ways around it, these numbers are bad, [but] markets don’t look at bad or good, they look at better or worse.”

That explains what the banks’ stock prices did this week. Typically lower profits would have sent bank shares tumbling, but shares in all five were sharply up as investors breathed that sigh of relief that Shanahan was talking about.

“People were expecting a lot worse, and they were better than worse in all facets,” Johnson said.

Not out of the woods yet

While he understands why the bank stocks rallied with relief, Johnson thinks that exhale may be premature as the real pain in the economy may not show up on the banks’ books for another few months, once mortgage payment deferrals run out, and massive government progams supplementing income to laid-off workers expire.

“We’ll start to see the real impact of this three [or] four months down the road, and that’ll be where … it’ll be interesting for markets,” he said.

One of the best ways of gauging how optimistic the banks are about their future is to look at their dividend payments.

Canada’s big banks are known as reliable dividend-paying machines, slowly and methodically nudging up their payments to shareholders every few quarters for more than a century. Those big bank dividends are so rock-solid that TD and Scotiabank somehow managed to hike theirs even in the middle of the financial crisis in 2009.

The banks love to hike their dividends because investors love that extra income. But banks won’t do it unless they are confident they’ll be able to sustain the higher level in perpetuity  — a harsh lesson that Quebec-focused bank Laurentian learned this week when it cut its payout, the first dividend slash by a Canadian lender that big in almost 30 years.

If dividend payouts are the best barometer of the financial health of Canada’s big banks — and, by extension, the economy — then the fact that none of them saw the need to cut this time around is an encouraging sign.

Those quarterly payouts look as rock-solid as ever, but even the banks admit the future still looks uncertain.

The CEO of National Bank, a distant sixth in the five-horse race atop Canadian banking, phrased it in a, well, enterprising fashion.

“This is Star Trek finance,” Louis Vachon said on a conference call with analysts to discuss the bank’s quarter, in which it booked one-third less profit and set aside five times more money for bad loans.

“We would describe the current environment as going where no one has gone before.”

Canada’s economy has managed to live long and prosper for decades on the backs of its biggest lenders, but Vachon makes it clear that those same banks are still keeping their shields up for now.

“We’re still watching for the Klingons [because] we’re not out of this crisis yet.”

Source: CBC.ca

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Edited BY Harry Miller

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Alaska man charged with sending graphic threats to kill Supreme Court justices

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WASHINGTON (AP) — An Alaska man accused of sending graphic threats to injure and kill six Supreme Court justices and some of their family members has been indicted on federal charges, authorities said Thursday.

Panos Anastasiou, 76, is accused of sending more than 465 messages through a public court website, including graphic threats of assassination and torture coupled with racist and homophobic rhetoric.

The indictment does not specify which justices Anastasiou targeted, but Attorney General Merrick Garland said he made the graphic threats as retaliation for decisions he disagreed with.

“Our democracy depends on the ability of public officials to do their jobs without fearing for their lives or the safety of their families,” he said.

Anastasiou has been indicted on 22 counts, including nine counts of making threats against a federal judge and 13 counts of making threats in interstate commerce.

He was released from detention late Thursday by a federal magistrate in Anchorage with a a list of conditions, including that he not directly or indirectly contact any of the six Supreme Court justices he allegedly threatened or any of their family members.

During the hearing that lasted more than hour, Magistrate Kyle Reardon noted some of the messages Anastasiou allegedly sent between March 2023 and mid-July 2024, including calling for the assassination of two of the Republican-appointed Supreme Court justices so the current Democratic president could appoint their successors.

Instead of toning down his rhetoric after receiving a visit from FBI agents last year, Anastasiou increased the frequency of his messages and their vitriolic language, Reardon said.

Gray-haired and shackled at the ankles above his salmon-colored plastic slippers, Anastasiou wore a yellow prison outfit with ACC printed in black on the back, the initials for the Anchorage Correctional Facility, at the hearing. Born in Greece, he moved to Anchorage 67 years ago. Reardon allowed him to contact his elected officials on other matters like global warming, but said the messages must be reviewed by his lawyers.

Defense attorney Jane Imholte noted Anastasiou is a Vietnam veteran who is undergoing treatment for throat cancer and has no financial means other than his Social Security benefits.

She told the judge that Anastaiou, who signed his own name to the emails, worried about his pets while being detained. She said he only wanted to return home to care for his dogs, Freddie, Buddy and Cutie Pie.

He faces a maximum of 10 years in prison for each count of making threats against a federal judge and up to five years for each count of making threats in interstate commerce if convicted.

Threats targeting federal judges overall have more than doubled in recent years amid a surge of similar violent messages directed at public officials around the country, the U.S. Marshals Service previously said.

In 2022, shortly after the leak of a draft opinion overturning Roe v. Wade, a man was stopped near the home of Justice Brett Kavanaugh with weapons and zip ties.

___

Thiessen reported from Anchorage, Alaska.

The Canadian Press. All rights reserved.



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An iconic Churchill photo stolen in Canada and found in Italy is ready to return

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ROME (AP) — Canadian and Italian dignitaries on Thursday marked the successful recovery of a photo portrait of Winston Churchill known as “The Roaring Lion,” stolen in Canada and recovered in Italy after a two-year search by police.

At a ceremony at the Canadian Embassy in Rome, Italian carabinieri police handed over the portrait to the Canadian ambassador to Italy, Elissa Goldberg, who praised the cooperation between Italian and Canadian investigators that led to the recovery.

The 1941 portrait of the British leader taken by Ottawa photographer Yousuf Karsh is now ready for the last step of its journey home to the Fairmont Château Laurier, the hotel in Ottawa where it was stolen and will once again be displayed as a notable historic portrait.

Canadian police said the portrait was stolen from the hotel sometime between Christmas 2021 and Jan. 6, 2022, and replaced with a forgery. The swap was only uncovered months later, in August, when a hotel worker noticed the frame was not hung properly and looked different than the others.

Nicola Cassinelli, a lawyer in Genoa, Italy, purchased the portrait in May 2022 at an online Sotheby’s auction for 5,292 British pounds. He says he got a phone call from the auction house that October advising him not to sell or otherwise transfer the portrait due to an investigation into the Ottawa theft.

Cassinelli, who attended Thursday’s ceremony, said he thought he was buying a regular print and quickly agreed to send the iconic Churchill photograph home when he learned its true story.

“I immediately decided to return it to the Chateau Laurier, because I think that if Karsh donated it to the hotel, it means he really wanted it to stay there, for the particular significance this hotel had for him, and for his wife too,” Cassinelli told The Associated Press.

The famous image was taken by Karsh during Churchill’s wartime visit to the Canadian Parliament in December 1941. It helped launch Karsh’s career, who photographed some of the 20th century’s most famed icons, including Nelson Mandela, Albert Einstein and Queen Elizabeth.

Karsh and his wife Estrellita gifted an original signed print to the Fairmont Chateau Laurier in 1998. The couple had lived and operated a studio inside the hotel for nearly two decades.

Geneviève Dumas, general manager of the Fairmont Château Laurier, said on Thursday she felt immensely grateful.

“I would like to extend my deepest gratitude to everybody involved in solving this case, and ensuring the safe return of this priceless piece of history.”

Police arrested a 43-year-old man from Powassan, Ontario, in April and have charged him with stealing and trafficking the portrait. The man, whose name is protected by a publication ban, faces charges that include forgery, theft over $5,000 and trafficking in property obtained by crime exceeding $5,000.

The Canadian Press. All rights reserved.



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Mexican president blames the US for bloodshed in Sinaloa as cartel violence surges

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CULIACAN, Mexico (AP) — Mexican President Andrés Manuel López Obrador blamed the United States in part on Thursday for the surge in cartel violence terrorizing the northern state of Sinaloa which has left at least 30 people dead in the past week.

Two warring factions of the Sinaloa cartel have clashed in the state capital of Culiacan in what appears to be a fight for power since two of its leaders were arrested in the United States in late July. Teams of gunmen have shot at each other and the security forces.

Meanwhile, dead bodies continued to pop up around the city. On one busy street corner, cars drove by pools of the blood leading to a body in a car mechanic shop, while heavily armed police in black masks loaded up another body stretched out on a side street of the Sinaloan city.

Asked at his morning briefing if the U.S. government was “jointly responsible” for this violence in Sinaloa, the president said, “Yes, of course … for having carried out this operation.”

The recent surge in cartel warfare had been expected after Joaquín Guzmán López, a son of former Sinaloa cartel leader Joaquín “El Chapo” Guzmán, landed near El Paso, Texas on July 25 in a small plane with Ismael “El Mayo” Zambada.

Zambada was the cartel’s elder figure and reclusive leader. After his arrest, he said in a letter circulated by his lawyer that he had been abducted by the younger Guzmán and taken to the U.S. against his will.

On Thursday afternoon, another military operation covered the north of Culiacan with military and circling helicopters.

Traffic was heavy in Culiacan and most schools were open, even though parents were still not sending their children to classes. Businesses continue to close early and few people venture out after dark. While the city has slowly reopened and soldiers patrol the streets, many families continue to hide away, with parents and teachers fearing they’ll be caught in the crossfire.

“Where is the security for our children, for ourselves too, for all citizens? It’s so dangerous here, you don’t want to go outside,” one Culiacan mother told the Associated Press.

The mother, who didn’t want to share her name out of fear of the cartels, said that while some schools have recently reopened, she hasn’t allowed her daughter to go for two weeks. She said she was scared to do so after armed men stopped a taxi they were traveling in on their way home, terrifying her child.

During his morning press briefing, López Obrador had claimed American authorities “carried out that operation” to capture Zambada and that “it was totally illegal, and agents from the Department of Justice were waiting for Mr. Mayo.”

“If we are now facing instability and clashes in Sinaloa, it is because they (the American government) made that decision,” he said.

He added that there “cannot be a cooperative relationship if they take unilateral decisions” like this. Mexican prosecutors have said they were considering bringing treason charges against those involved in the plan to nab Zambada.

He was echoed by President-elect Claudia Sheinbaum, who said later in the day that “we can never accept that there is no communication or collaboration.”

It’s the latest escalation of tensions in the U.S.-Mexico relationship. Last month, the Mexican president said he was putting relations with the U.S. and Canadian embassies “on pause” after ambassadors criticized his controversial plan to overhaul Mexico’s judiciary by requiring all judges to stand for election.

Still, the Zambada capture has fueled criticisms of López Obrador, who has throughout his administration refused to confront cartels in a strategy he refers to as “hugs not bullets.” On previous occasions, he falsely stated that cartels respect Mexican citizens and largely fight amongst themselves.

While the president, who is set to leave office at the end of the month, has promised his plan would reduce cartel violence, such clashes continue to plague Mexico. Cartels employ an increasing array of tactics, including roadside bombs or IEDs, trenches, home-made armored vehicles and bomb-dropping drones.

Last week, López Obrador publicly asked Sinaloa’s warring factions to act “responsibly” and noted that he believed the cartels would listen to him.

But the bloodshed has only continued.

The Canadian Press. All rights reserved.



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