Canada’s six biggest banks are offering to ease up on customers if they have been hit hard by the new coronavirus, including by allowing some borrowers to delay mortgage payments for as much as half a year.
Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank all announced offers of financial assistance in press releases sent out late Tuesday and early Wednesday.
The banks “have made a commitment to work with personal and small business banking customers on a case-by-case basis to provide flexible solutions to help them manage through challenges such as pay disruption due to COVID-19; childcare disruption due to school closures; or those facing illness from COVID-19,” according to a release from the lenders.
“This support will include up to a six-month payment deferral for mortgages, and the opportunity for relief on other credit products,” the banks say.
National Bank noted its measures could also include extending the amortization period of a mortgage or offering “special loans” to cover living expenses. BMO’s financial relief program could provide “deferral of payments on loans and credit cards,” the bank said.
“These measures are an important first step and underscore the resilience of Canada’s financial system and the strength of our major banks,” the release from the Big Six stated. “Banks will monitor evolving economic conditions and consider other measures if necessary.”
The offer of financial help for customers comes as banks have said they will be temporarily closing some branches and reducing the hours others are open. The social-distancing measures are being taken in response to the new coronavirus.
Moreover, the offer of assistance comes as the federal government, regulators and Canada’s central bank have taken a number of steps to ensure the financial system remains upright during the coronavirus pandemic.
Finance Minister Bill Morneau said last week he had been speaking with the CEOs of Canada’s big banks and that the lenders “made a commitment to me” to support consumers and businesses during the crisis.
Canada Mortgage and Housing Corp. says it has allowed for forbearance on mortgages it insures against borrower default and will begin using a “market liquidity tool” it used during the global financial crisis to buy up to $50 billion of insured mortgage pools.
“We are also exploring, with others, potential relief measures for those who cannot make payments on uninsured mortgages and renters,” CMHC CEO Evan Siddall stated in a letter to clients on Tuesday.
For Canada’s big banks, as with other industries, 2020 is quickly shaping up to be a challenging year. The coronavirus outbreak has become a global health crisis that has sickened thousands, disrupting day-to-day life and forcing governments to put business and travel restrictions in place.
Banks will have to try to grind out profits with lower interest rates, which put pressure on the spread between what they charge for loans and pay out to savers. Lenders also face the likelihood of having to set aside more money for loan losses as consumers and businesses face possible cash crunches.
“While the actions taken may have the impact of moderating the depth of a potential recession, we believe the implications of the rate cut means that earnings headwinds for the banks will intensify, as the group continues to face earnings pressure from ongoing net interest margin compression and lower lending volumes,” Barclays analyst John Aiken wrote on Tuesday.
Financial Post
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