The ratio of what Canadians owe versus their ability to pay it back went down in the first three months of COVID-19, but that unexpectedly brighter debt picture could be hiding a wave of bankruptcies waiting to emerge.
Statistics Canada reported Friday that the debt to disposable income ratio fell to 158.2 per cent in the three months between April and June, compared with a reading of 175.4 per cent in the first three months of the year.
That means that Canadian households owed $1.58 for every dollar they had to spend as of the end of June. That ratio peaked at 177 per cent in 2017 and has held steady in the 170 range up until the sudden drop this year.
While it’s encouraging to think that Canadians are managing to pay down their debt loads during the pandemic, insolvency trustee Scott Terrio with Hoyes & Michalos says that number can mislead about what’s happening beneath the surface.
Prior to the pandemic’s start in March, consumer insolvencies had been growing at a double-digit pace since the start of 2019 as the system worked through a decade of debt fuelled by a low rate that Terrio said people “binged” on “and kicked the can down the road.”
Most of Canada’s household debt comes in the form of mortgages, but Canadians also owed $779.4 billion on things like credit cards at the end of June. (Getty Images)
But the massive wave of support programs rolled out by governments across the country seem to have had their designed effect of keeping peoples’ heads above water, too.
While the record number of layoffs made a dent in incomes, many people who were in trouble before COVID-19 got some relief simply because they weren’t spending as much.
As daycares shut down and parents moved to work from home en masse, “all of a sudden, people weren’t paying $2,000 a month in daycare for five months,” Terrio said.
In addition to government stimulus, roughly one out of every six Canadian homeowners with a mortgage applied for programs that banks offered to defer all or part of payments for up to six months this spring. But those programs are slated to end in the coming weeks, and those bills have to be paid.
Insolvency trustee Scott Terrio is expecting a wave of bankruptcies and insolvencies to start this fall and winter. (Martin Trainor/CBC)
“The ones I’m worried about are the ones who had significant debt and then one of the spouses stopped working,” he said.
“They’ve taken advantage of deferrals and benefits [but] that ride is gonna end.”
Savings up sharply, too
All told, Canadians owed $2.3 trillion at the end of June, which consists of $1.5 trillion worth of mortgages, and $779.4 billion worth of consumer debt such as credit cards.
The Statscan numbers show the debt picture is changing very unevenly across different income groups.
The lowest 20 per cent had a debt to income ratio of 281.7 per cent at the end of June, meaning they owed almost $3 for every dollar they had on hand to spend. Those in the top 20 per cent, meanwhile, owed just $1.38 for every dollar of disposable income they had.
Those imbalances are part of why Terrio predicts that insolvencies are going to come back “with a vengeance ” in the coming months.
“Once the courts open you’ll find out how much your bank loves you,” he said.
‘Delinquency tsunami’
TD Bank economist Ksenia Bushmeneva found reasons for optimism in the numbers.
“One of the major risks heading into this pandemic-induced recession was the high level of household indebtedness in Canada, which could greatly amplify the hit to the economy and slow the subsequent recovery,” she said.
“So far, it appears that the consumer side of the economy has held up better than might have been expected at the start of the crisis.”
Bushmeneva was especially heartened by the fact that the debt service ratio — the amount of money spent on servicing debt loads — fell by its highest amount on record, to 12.4 per cent from 14.54 per cent, largely because of lower rates.
In addition, she noticed that the household savings rate — the percentage of disposable income that households manage to save — soared from 3.9 per cent at the end of 2019 to 28.2 per cent in June, a level she described as “eye popping.”
But she is also worried about what could be coming down the pipeline.
“The unprecedented federal government income support programs and payment deferrals by financial institutions have been paramount for averting a delinquency tsunami and protecting household finances,” she said. “However, more challenging times are likely ahead.
“Delinquencies and consumer insolvencies will likely begin to rise at the end of this year and into 2021.”
TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
