Total credit loss provisioning rose sharply to $23.7 billion in 2020, up from $8.9 billion recorded in the prior year. Yet most of this came on performing loans, it reported.
Gross impaired loans rose in 2020 too, largely driven by credit impairments in sectors most directly affected by the pandemic, DBRS said, particularly the oil and gas, retail, and hospitality sectors.
Nonetheless, the banks also generated still-solid loan growth of 5% year over year, it said.
Loan growth was largely powered by residential mortgage lending, amid low mortgage rates and strong housing markets.
“Conversely, other personal lending growth was muted during [fiscal 2020], with aggregate credit card balances declining a significant 13% year over year as consumers remained cautious and economic activity was muted,” said DBRS.
As well, commercial loan growth slowed to 5% from double-digit growth in prior years.
Looking ahead, gross impaired loans are expected to rise in 2021 as loan deferrals that were implemented in the face of the pandemic have since expired.
DBRS said the outlook for future loan loss provisioning “will largely be a function of loan growth and credit migration.”
The underlying economic outlook remains uncertain too, particularly in the short term.
Under its moderate scenario, DBRS forecast that Canadian GDP contracted by 5.5% in 2020. GDP is expected to by 5.0% in 2021, followed by 2.5% growth in 2022.
“The near-term economic outlook remains troubling and recovery prospects will likely depend on the severity and duration of the current coronavirus resurgence; however, we expect the outlook to brighten by mid-year as vaccines become more widely available,” said Robert Colangelo, senior vice president, global financial institutions group at DBRS Morningstar.
Given the uncertain economic outlook, DBRS said it expects “the earnings power of banks to continue to be constrained; however, their highly diversified franchises and demonstrated abilities to manage expenses should provide an offset.”
Additionally, the banks’ capital and liquidity levels will remain elevated and well above the regulatory minimums, it said.
The banks’ aggregate tier one capital ratio rose by 80 basis points in fiscal 2020 to 12.3% “largely driven by internal capital generation,” DBRS said. “This high level of capital provides these banks with a significant capital buffer to absorb higher credit losses.”
“Restrictions on dividend increases and share buybacks may be lifted once the path to economic recovery becomes clearer,” it said.
For now, DBRS has a stable outlook on the banks’ credit ratings. Upgrades remain unlikely due to the operating environment, whereas negative rating pressure could materialize if the banks “experience a sustained deterioration in asset quality or a significant weakening of profitability,” it said.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
