After a lull in the early days of COVID-19, more and more Canadians are starting to declare bankruptcy again, and experts in the field say government has to do more and soon or the economy could face a tsunami of insolvencies in the coming months.
The Office of the Superintendent of Bankruptcy Canada reported this week 7,658 Canadians filed insolvencies in September, an increase of almost 19 per cent from the previous month’s level and the highest since the COVID-19 pandemic began in March.
Despite the economic hardship that the pandemic has brought, bankruptcy proceedings actually slowed to a crawl for most of 2020 because the unprecedented slew of support programs gave many Canadians a boost to their incomes — and often a temporary respite from their debts, enough to keep their heads above water.
“In the early days of COVID, everything went on pause, including collections,” licensed insolvency trustee Andre Bolduc said in an interview. “Finances went on the back burner but things are slowly getting back to the new normal.”
The insolvency rate is actually about a third lower than it was this time last year, but experts like Bolduc expect it to multiply over the coming winter months and likely eclipse previous highs. “Before COVID a majority of households were living paycheque to paycheque,” he said. “[Their] debts didn’t go anywhere, [so] they will still be there after COVID.”
Liz Mulholland, CEO of Prosper Canada, a charity dedicated to expanding economic opportunity for Canadians living in poverty, describes the situation as “a slow motion train wreck that’s going to unfold over the next six months.”
Very few people who undergo credit counselling need to go through the process again, which is a sign it works, Michelle Pommells says. (Credit Counselling Canada)
While many Canadians have managed to make ends meet, Mulholland estimates that as much as 25 per cent of the population are watching their financial position “worsening by the week. They are moving inexorably toward that financial cliff of insolvency and they will go over it sometime this winter,” she said.
Government programs such as the Canada Emergency Response Benefit (CERB) were a lifeline for many of them, but with that program finished and now transferred into the less generous Canada Recovery Benefit — which is itself set to expire next year — the number of Canadians on a financial knife’s edge is set to grow.
Michelle Pommells, CEO of Credit Counselling Canada, says those income support programs certainly helped, as did much publicized mortgage deferral programs that gave roughly one in six Canadian borrowers a temporary reprieve on interest payments. But those programs are also winding down now.
“For families that got into trouble, deferrals have helped but there’s no such thing as a free lunch,” she said in an interview.
Credit counselling
Pommells says even before the pandemic many people were not taking advantage of credit counselling services that can often help them find a path out of a financial quagmire.
She says the typical person going insolvent tends to have between four and six revolving lines of credit and is often shuffling debt from one into the next. “They are just moving the ball along until finally they can no longer acquire credit and then at that point it’s pretty dire,” she said. “Every month the pit of debt gets deeper [and it can be] tremendously difficult to get out of.”
Insolvencies can take the form of a bankruptcy, where a borrower gets their debt wiped out but at the cost of losing any of their assets — and also find it next to impossible to borrow in the future. Or they can be what’s called a proposal to creditors, where the borrower agrees to pay back a portion of what they owe, with the creditor’s OK.
Credit counselling aims to give borrowers the tools they need to not slip beneath the waves again. Pommells said the recidivism rate (the number of people who end up going through the process again) is 0.01 per cent. “It works,” she said.
Mulholland agrees that a big part of stemming the tide of insolvencies will be credit counselling programs. That’s why she worries about other useful programs that were cut off at the knees by the pandemic.
Beyond the emergency programs created during the pandemic, low income Canadians are at risk of missing out on regular benefit programs because of shutdowns. Nearly three-quarters-of-a-million low income Canadians rely on free tax clinics to file their taxes. About 400,000 did so before lockdowns in March closed them all. A small number have since reopened, but she says it’s likely that many people who use them still haven’t filed their 2019 taxes yet.
Liz Mulholland says she’s worried about people whose finances were in bad shape even before COVID-19. (Prosper Canada )
That means 35,000 low-income seniors aren’t eligible for the Guaranteed Income Supplement they would otherwise be entitled to. That’s up to $917 a month. And the Canada Child Benefit pays out up to $6,000 a year per child to Canadian families, but it too depends on tax filings. Even beyond emergency programs, those two could be “paying rent and putting food on the table,” Mulholland said.
It’s why Prosper is asking the federal government to restart funding for a whole slew of programs that target those who need it most. Against the backdrop of a $343-billion federal deficit, the ask is a relative pittance — $15 million to help 750,000 Canadians most in need access financial health services they likely already qualify for.
Mulholland says other countries, including the U.K., Australia and New Zealand, have spent far more on similar initiatives, because the cost of inaction far outweighs the cost of the programs themselves.
“If 20 per cent of your population is in this boat, that’s a real brake on your recovery [because] there is no consumer confidence. They are not going to be out there spending money,” she said.
“As my mother would say, you’re being penny wise and pound foolish.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
