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As pandemic relief winds down, Canadian banks brace for a new reality – Yahoo Canada Finance



As pandemic relief winds down, Canadian banks brace for a new reality
FILE PHOTO: A Royal Bank of Canada logo is seen on Bay Street in the heart of the financial district in Toronto

By Nichola Saminather

TORONTO (Reuters) – Canadian banks are warning of a rise in credit impairments over the next year as the unwinding of government aid and loan deferral programs in coming months exposes lenders to the real damage to customers from the coronavirus crisis.

Bank executives say they are preparing for a long and choppy recovery from the pandemic, which has pushed the Canadian economy into a recession.

Customer relief measures have so far kept a lid on bad loans, and five of the top six banks reported better-than-expected third-quarter profits this week, helped by strong capital markets and trading activities.

“The real test of the recovery will come once government support programs start to wind down,” Dave McKay, chief executive officer of Royal Bank of Canada <RY.TO>, the nation’s biggest lender, told an analyst call.

“It may take one or two years for us to get back to where we were before.”

Banks have already ended mortgage deferrals for some customers and most banks reported declines in loan balances subject to deferral. So far, most customers who exited had resumed repayments, executives said on analyst calls, in large part assisted by extraordinary government aid.

The top six banks reported Canadian mortgage deferrals of 13.5% in the three months through July, from a peak of 16% at the end of the previous quarter.

Bank of Montreal’s <BMO.TO> Chief Risk Officer Patrick Cronin said on an analyst call he expects delinquencies of between 1% and 5% of total loans as deferrals end.


The six biggest banks have set aside C$17 billion over the past two quarters for expected loan losses, and most said they expect these to be sufficient to cover an anticipated increase in impairments, barring a worsening of economic conditions.

Banks expect most of the deferrals to end in October or November and Canada will replace its pandemic-related unemployment benefit program with an expanded employment insurance plan that requires people to be seeking jobs to qualify.

Even though banks’ reserves are far in excess of charge-offs and impairments seen so far, loan loss provisions are set to remain elevated relative to pre-pandemic levels in future quarters, Edward Jones analyst James Shanahan said.

“Our 2021 estimates (for earnings) are probably still, on average, 15% lower than what the banks reported for 2019.”

While this will be driven in large part by provisions, it is also due to slower loan growth and lower margins, he said.

Toronto-Dominion Bank <TD.TO> and RBC said they have also given increased weighting to their pessimistic macro-economic scenarios, which envision elevated unemployment and lower home prices for longer, which is reflected in their reserves.

“In Canada, unemployment numbers are higher, GDP lower… that’s what’s driving our allowance (for losses) up,” TD Chief Risk Officer Ajai Bambawale told analysts on Thursday.

($1 = 1.3126 Canadian dollars)

(Reporting By Nichola Saminather; editing by Richard Pullin)

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Everything you need to know about the Canada Recovery Benefit, the new program replacing CERB – National Post



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How do I know if I qualify for EI?

For the next year, accessing EI benefits is much easier. To qualify for EI, you must have been employed for at least 120 insurable hours in the past 52 weeks. If you received CERB, that 52-week deadline can be extended.

These changes will also establish a minimum weekly benefit rate of $500 for EI recipients, at the same level as CRB.

How much are the CRB payments and how often will I get them?

You will receive $500 per week for up to 26 weeks.

What other benefits are there?

The Canada Recovery Sickness Benefit (CRSB) provides $500 per week for up to two weeks for workers who are sick, or who must self-isolate for reasons related to COVID-19. People who receive paid sick leave from their employer are not eligible.

The Canada Recovery Caregiving Benefit (CRCB) provides $500 per week for up to 26 weeks per household for eligible Canadians unable to work because they must care for a child or family member.

You cannot claim CRCB or CRSB while on EI or CRB.

Is CRB taxable?

All benefits received under the three Canada Recovery Benefit programs are considered taxable income.

Where do I apply for CRB

Just like CERB, you will be able to apply for CRB through the Canada Revenue Agency (CRA) portal.

For more information, see the government’s website.

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Canada's GDP grew 3 per cent in July – Yahoo Canada Finance



EDMONTON, ALBERTA - AUGUST 28: Construction continues on the LRT - Light Rail Transit through the city centre as photographed on August 28, 2020 in Edmonton, Alberta, Canada. (Photo by Bruce Bennett/Getty Images)
EDMONTON, ALBERTA – AUGUST 28: Construction continues on the LRT – Light Rail Transit through the city centre as photographed on August 28, 2020 in Edmonton, Alberta, Canada. (Photo by Bruce Bennett/Getty Images)

Canadian GDP expanded by 3 per cent in July, as the economic recovery from the effects of COVID-19 continues.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Statistics Canada says it was the third straight month-over-month increase, but the economy remains 6 per cent below its pre-pandemic level.” data-reactid=”24″>Statistics Canada says it was the third straight month-over-month increase, but the economy remains 6 per cent below its pre-pandemic level.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Growth is also slowing, considering June’s increase was 6.5 per cent.” data-reactid=”25″>Growth is also slowing, considering June’s increase was 6.5 per cent.

All 20 industrial sectors were higher.

Some industries faired better than before the pandemic. Agriculture, utilities, finance and insurance, and real estate rental and leasing sectors surpassed February’s levels.

The manufacturing sector grew 5.7 per cent as factories continued to ramp up production. Accommodation and food services jumped 20.1 per cent, the third straight double digit advance.

“But those figures come off a very low base and are still facing the deepest slump versus year-ago levels. With the resurgence in virus cases, the struggles in those sectors could actually deepen further in the near-term,” said Benjamin Reitzes, director, Canadian rates & macro strategist at BMO.

In another sign of slowing growth going forward, Statistics Canada estimates GDP grew by 1 per cent in August.

“Together, the data are consistent with our call for a roughly 46 per cent annualized gain in Q3 GDP, but the slowing in August, coupled with the surge in the virus in recent weeks, suggest a much smaller gain is in store for Q4,” said Avery Shenfeld, chief economist at CIBC World Markets.

For comparison, annualized GDP fell 38.7 per cent in the second quarter — the worst since Statistics Canada started tracking it in 1961.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter&nbsp;@jessysbains.” data-reactid=”33″>Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Download the Yahoo Finance app, available for&nbsp;Apple&nbsp;and&nbsp;Android.” data-reactid=”34″>Download the Yahoo Finance app, available for Apple and Android.

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New parents waiting months for financial benefits amid surge in CERB claims –



Months after having their babies, some parents are still waiting to receive benefits from Canada’s employment insurance program, which has been overloaded during the COVID-19 pandemic. 

“It’s been a complete financial change and strain for us,” said Alanna Los of Brandon, Man., who had her second child July 1. “I’ve been literally on the phone every day almost for the past three months.”

Normally, people applying for parental benefits should expect to wait only about one month for their first payment, according to the federal government’s website. But with millions of Canadians unemployed or under-employed during the pandemic, strain on the employment insurance (EI) system is likely causing delays.

While she was pregnant, Los was on sick leave from her job as a nurse after she was rear-ended in a car crash. Two days after her daughter was born, she called Service Canada to switch over her sick leave payments to her parental leave benefits. The agent with whom she spoke confirmed the change was made and said she was approved, Los said.

Months later, Los said, she hasn’t received any support from the government.

She has had to dip into her savings to pay bills, she said. 

Los isn’t alone. When she posted about her issues on a Facebook group, several mothers shared similar stories, she said. 

“This is a system you’re supposed to be dependant on, but it’s not there for moms right now,” Los said.

‘I’m completely broke’

Leta Jonasson had her son Aug. 12, and has maxed out her credit card waiting for her parental benefit since his birth, she said.

“It’s been pretty stressful,” said the Winnipeg mom, whose spouse was also laid off during the pandemic. 

Alanna Los has been waiting on her parental benefits since the birth of her daughter on July 1. Experts suggest delays are in part due to the strain of paying out emergency benefits to four million Canadians who are unemployed or under-employed because of the pandemic. (Submitted by Alanna Los)

Jonasson, 26, who also has another child, worked as a retail store manager, but she’s been off since March because of the pandemic. She had been receiving support from the Canada Emergency Response Benefit (CERB), but those payments stopped when she applied for parental benefits, she said. 

“I’m completely broke until I get my maternity leave benefit,” Jonasson said.

She said she feels lucky to have family and a partner who support her as much as possible and can’t imagine what others who don’t have that safety net would do. 

“If I didn’t have their help, I’d really be in a bad spot because of bills and everything,” Jonasson said.

Two mothers in Ontario also told CBC News they’ve been waiting more than two months for their parental benefits.

CBC News reached out to Service Canada, but the agency declined to answer questions about ongoing service delays.

“The department understands the difficulties that any delay in benefit payments can cause to claimants and their families, and is working to address the issue as soon as possible,” spokesperson Marie-Eve Sigouin-Campeau said.

‘System is not designed for this’

Service delays are likely due to the strain the government is under having to pay emergency benefits to four million Canadians who are unemployed or under-employed because of the pandemic, one expert says.

Back in May, the federal government said the employment insurance (EI) call centre was experiencing an unprecedented volume of calls, which was affecting service accessibility and wait times. 

At the time, the government said it was working to increase the number of agents taking calls and pursuing additional measures to increase the automation of calls.

There’s likely still a backlog in trying to deal with the high number of people collecting CERB, EI and other government benefits, said Moshe Lander, a lecturer in the department of economics at Concordia University in Montreal.

Prime Minister Justin Trudeau announced July 31 that the government would transition recipients of the Canada Emergency Response Benefit (CERB) to employment insurance (EI). (CBC )

“I think it’s just the nature of trying to process this many claims in extremely irregular circumstances,” said Lander. “The system is not designed for this. And so, of course, it’s not going to work properly.”


Bureaucratic hurdles are putting added stress on a demographic that’s already facing a great deal of hardship because of the pandemic, said Katherine Scott of the Canadian Centre for Policy Alternatives.

Women have been disproportionately affected by the economic fallout of the pandemic, and months after the onset of the crisis their return to employment lags behind that of men, Scott wrote in a report earlier this month.

“Women continue to be unemployed in greater numbers and are still working reduced hours in the jobs they do have,” she said. “This has certainly been a she-cession, as it’s been coined.”

WATCH | Manitoba mothers on the financial impact of waiting for parental benefits:

Months after giving birth, some new parents are still waiting to receive parental benefits from Canada’s Employment Insurance program. 1:59

On top of that, the glitches with accessing CERB, EI and parental benefits mean some people are falling through the cracks, she said.

“It’s just crazy-making in the face of acute stress for many, many families,” Scott said.

Scott said the delays could persist or even increase as the government transitions from CERB to EI.

“The stress on the system will actually magnify,” she said.

“If you’re an expectant parent, you’ve got to wonder, will your claim proceed in a timely fashion? And it may well not.”

For parents such as Jonasson and Los, that means more calls to Ottawa, and more stress on their families.

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