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COVID-19 has Canada’s banks worried about sickly loans

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If Canada’s big banks are the canary in the coal mine for the economy as a whole, then there was some good news this week, and some less good news.

While the COVID-19 pandemic wreaked havoc on Canadian society, Canada’s five biggest lenders — Royal Bank, Bank of Montreal, Scotiabank, CIBC and TD — remained profitable even as they set aside billions of dollars to offset possible losses from loans that might go bad in the coming months.

It was expected that measures to contain the pandemic, such as school and business closures, border shutdowns and travel restrictions, would grind economic activity to a halt, but the banks’ quarterly financial results for the three-month period up to April 30 were hotly anticipated because they are a deep dive into just how bad the economy was really doing.

If businesses like manufacturers, oil and gas companies, retailers and tech startups are having trouble paying their bills, that tends to show up at the big banks, which lend them money.

Analysts say one of the best ways of gauging how companies are doing is by paying attention to a banking metric known as loan loss provisions. That’s a complicated-sounding term for a fundamentally simple concept: how much banks set aside to pay for loans on their books they think might not get paid back.

Not all those loans will turn into losses. But paying attention to how much the banks are setting aside just in case is an excellent proxy for how worried they are.

Combined, Canada’s big five lenders set aside almost $11 billion last quarter to cover loans that aren’t currently being paid off as planned. That’s almost five times as much as they had set aside for bad loans in the same three-month period last year.

That’s the bad news. The good news? “They were bad, but not as bad as feared,” said Jim Shanahan, an analyst with investment firm Edward Jones who covers Canada’s big banks.

Considering the massive number of layoffs, business closures and the glacial pace of trade flows across the Canada-U.S. border due to COVID-19, there were fears that loan losses could have been “at levels that we would never have contemplated,” Shanahan said.

But that didn’t happen.

It’s equally important to note that even in all this, the banks are still making money. Collectively, the banks raked in nearly $5 billion in profits over the three months. That’s well below their usual pace, but Shanahan said there was “almost a collective sigh of relief” that the banks were still profitable.

Art Johnson, the founder of Calgary-based SmartBe Wealth, is one of the few money managers in Canada who doesn’t think shares in Canadian bank stocks are always worth buying, but even he admits their week went a lot better than it could have gone.

 

Canada’s big banks are proxies for the economy: when the people and businesses they lend to have financial problems, that tends to show up on the banks’ books. (David Donnelly/CBC)

 

“When I look at the numbers, they’re bad,” he said in an interview. “There’s no two ways around it, these numbers are bad, [but] markets don’t look at bad or good, they look at better or worse.”

That explains what the banks’ stock prices did this week. Typically lower profits would have sent bank shares tumbling, but shares in all five were sharply up as investors breathed that sigh of relief that Shanahan was talking about.

“People were expecting a lot worse, and they were better than worse in all facets,” Johnson said.

Not out of the woods yet

While he understands why the bank stocks rallied with relief, Johnson thinks that exhale may be premature as the real pain in the economy may not show up on the banks’ books for another few months, once mortgage payment deferrals run out, and massive government progams supplementing income to laid-off workers expire.

“We’ll start to see the real impact of this three [or] four months down the road, and that’ll be where … it’ll be interesting for markets,” he said.

One of the best ways of gauging how optimistic the banks are about their future is to look at their dividend payments.

Canada’s big banks are known as reliable dividend-paying machines, slowly and methodically nudging up their payments to shareholders every few quarters for more than a century. Those big bank dividends are so rock-solid that TD and Scotiabank somehow managed to hike theirs even in the middle of the financial crisis in 2009.

The banks love to hike their dividends because investors love that extra income. But banks won’t do it unless they are confident they’ll be able to sustain the higher level in perpetuity  — a harsh lesson that Quebec-focused bank Laurentian learned this week when it cut its payout, the first dividend slash by a Canadian lender that big in almost 30 years.

If dividend payouts are the best barometer of the financial health of Canada’s big banks — and, by extension, the economy — then the fact that none of them saw the need to cut this time around is an encouraging sign.

Those quarterly payouts look as rock-solid as ever, but even the banks admit the future still looks uncertain.

The CEO of National Bank, a distant sixth in the five-horse race atop Canadian banking, phrased it in a, well, enterprising fashion.

“This is Star Trek finance,” Louis Vachon said on a conference call with analysts to discuss the bank’s quarter, in which it booked one-third less profit and set aside five times more money for bad loans.

“We would describe the current environment as going where no one has gone before.”

Canada’s economy has managed to live long and prosper for decades on the backs of its biggest lenders, but Vachon makes it clear that those same banks are still keeping their shields up for now.

“We’re still watching for the Klingons [because] we’re not out of this crisis yet.”

Source: CBC.ca

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Edited BY Harry Miller

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N.S. legal scholar’s book describes ‘mainstream’ porn’s rise, and the price women pay

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HALIFAX – When legal scholar Elaine Craig started researching pornography, she knew little about websites such as Pornhub or xHamster — and she did not anticipate that the harsh scenes she would view would at times force her to step away.

Four years later, the Dalhousie University law professor has published a book that portrays in graphic detail the rise of ubiquitous free porn, concluding it is causing harm to the “sexual integrity” of girls, women and the community at large.

The 386-page volume, titled “Mainstreaming Porn” (McGill-Queen’s University Press), begins by outlining how porn-streaming firms claim to create “safe spaces” for adults to view “consensual, perfectly legal sex,” as their moderators — both automated and human — keep depictions of illegal acts off the sites.

But as the 49-year-old professor worked through the topic, she came to question these claims. Depictions of sex that find their way onto the platforms are far from benign, she says.

“Representations of sex in mainstream porn … that weaponize sex against women and girls, that represent it as a tactic to be deployed against unconscious women or unsuspecting ‘daughters’ when their mothers are not home … do not promote sexual integrity and human flourishing,” she writes in her closing chapter.

Joanna Birenbaum, a Toronto-based lawyer who has worked with sexual assault victims for 20 years, said in a recent email that Craig’s work is the first to “really make the connection between porn, its impact on women and girls … and the ways in which it has evolved to become part of the tech industry.”

“It is eye-opening because it is so frank and concrete … for those who are unaware of what can be found on these mainstream platforms.”

For example, Canadian criminal law is clear that when a person is asleep, they lack the capacity for sexual consent. But Craig’s online searches of porn platforms found “countless videos” depicting the perpetration of sexual assault on “sleeping or unconscious women.” The difference in the pseudo-reality of porn was the women were almost always depicted as pleased and accepting.

Meanwhile, the book finds that “incest-based” porn — and the associated “tags” designed to draw viewers — are “as prolific as they are popular.” Craig said during an interview at her campus office that she believes a subset of this category, showing male family members having sex with female performers depicted as girls, meets the definition of child pornography.

Then there are the depictions of the surreptitious filming of sex without the knowledge of those being recorded, “another relatively common phenomenon on porn-streaming platforms,” she writes. In her closing chapters, she urges all provinces to pass laws to allow rapid removal of such material from sites.

For Craig, a mother of two boys, her journey into this world was draining. After writing the chapter on incest-themed porn, she had to take three months away from the project. “I found it challenging to watch some of it,” she said.

In her book, Craig notes how last year, after a judge sentenced an Ottawa man to seven years in prison for posting secret sex videos, a vice-president with Ethical Capital Partners — which owns Pornhub’s parent Aylo — said the site no longer allows individuals to search for videos under the tag, “hidden camera.”

But when Craig checked she found that, while the term “hidden camera” yielded no videos on Pornhub, using just the term “hidden” did produce results. Titles on the first page of her search results included, “Dragged a sexy classmate into bed and filmed sex on a hidden phone.” Other categories including “secret voyeur,” “real amateur hidden” and “spy” also yielded videos.

A Pornhub spokesman said in an emailed statement this week that the company has a list of more than 35,000 banned keywords and millions of permutations “that prevent users from trying to search for words that may violate our terms of service.” He said the list is “constantly evolving, with new words regularly added in multiple languages.”

In her closing chapters, Craig questions whether using criminal law to go after the producers and possessors of the porn she considers illegal will be effective. Instead she prefers a human rights approach that identifies “hateful” porn and monitors remedies over time.

Her research found that certain graphic slurs directed at women yielded links to hundreds of videos last year on Pornhub, and Craig argues these expressions can be seen as part of a “taxonomy of misogyny and racism” that the sites are building.

She argues for federal legislation to prohibit streaming companies from promoting videos with titles, tags and categories that meet the definition of hate speech — “vilification and detestation on the basis of sex or race, for example.”

The author notes that the Online Harms Act — currently before Parliament — would create a digital safety commission and impose a “duty of responsibility” on porn sites to prevent harmful content toward children. However, Craig calls for the same approach to be applied to “the unique harms” the streaming platforms are creating for women.

Craig argues against an “absolutist” ban on porn, making the case that this is unrealistic, but she calls for a landscape where “sex should not be mean” and where parents and schools start to educate teenagers about the harmful forms of sexuality they may encounter on the free platforms.

“Mainstream porn-streaming platforms should be held more responsible for preventing these harms and for bearing their costs when they fail,” she writes.

This report by The Canadian Press was first published Nov. 13, 2024.



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Trump’s appointees have criticized Trudeau, warned of border issues with Canada

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WASHINGTON – Donald Trump’s second administration is filling up with some of his most loyal supporters and many of the people landing top jobs have been critical of Prime Minister Justin Trudeau and security at Canada’s border.

One expert says there are not many Canadian allies, so far, in the president-elect’s court.

“I don’t see a whole lot of friends of Canada in there,” said Fen Hampson, a professor of international affairs at Carleton University in Ottawa and co-chair of the Expert Group on Canada-U.S. Relations.

As the Republican leader starts making crucial decisions about his administration, designations for foreign policy and border positions have sent signals to Canada, and the rest of the world, about America’s path forward.

Trump campaigned on imposing a minimum 10 per cent across-the-board import tariff. A Canadian Chamber of Commerce report suggests that would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

The president-elect is also critical of giving aid to Ukraine in its war against Russian aggression and has attacked the United Nations, both things the Liberal government in Canada strongly backs.

Trump tapped Mike Waltz to be national security adviser amid increasing geopolitical instability, saying in a statement Tuesday that Waltz “will be a tremendous champion of our pursuit of Peace through Strength!”

Waltz, a three-term congressman from Florida, has repeatedly slammed Trudeau on social media, particularly for his handling of issues related to China.

He also recently weighed in on the looming Canadian election, posting on X that Conservative Leader Pierre Poilievre was going to “send Trudeau packing in 2025” and “start digging Canada out of the progressive mess it’s in.”

Like Trump, Waltz has been critical of NATO members that don’t meet defence spending targets — something Canada is not doing, and won’t do for years.

Trudeau promised to meet the target of spending the equivalent of two per cent of GDP on defence by 2032.

Immigration and border security were a key focus for Republicans during the election and numerous key appointees have their eyes to the north.

It’s been reported that Florida Sen. Marco Rubio, a vocal critic of China, is expected to be named Secretary of State.

Rubio has pointed to concerns at the Canada-U.S. border. He recently blasted Canada’s move to accept Palestinian refugees, claiming “terrorists and known criminals continue to stream across U.S. land borders, including from Canada.”

Trump’s choice for ambassador to the United Nations, New York Congresswoman Elise Stefanik, has also focused on the border with Canada.

Stefanik, as a member of the Northern Border Security Caucus, called for Homeland Security to secure the border, claiming there had been an increase in human and drug trafficking.

“We must protect our children from these dangerous illegal immigrants who are pouring across our northern border in record numbers,” she posted on X last month.

Stefanik has little foreign policy experience, but Trump described her as a “smart America First fighter.” She repeatedly denounced the UN, saying the international organization is antisemitic for its criticism of Israel’s bombardment of Gaza.

U.S. media reports say longtime Trump loyalist Kristi Noem, South Dakota’s governor, has been chosen to run Homeland Security. She was on the shortlist to be vice-president until controversy erupted over an anecdote in her book about shooting a dog.

“She doesn’t seem to have very warm feelings (toward Canada),” Hampson said

Last year, she claimed to be having conversations with a Canadian family-owned business looking to relocate to her state because of COVID-19 pandemic restrictions.

But Noem has also said that the Canada-U.S.-Mexico Agreement, negotiated under the first Trump administration, was “a major win.”

The trilateral agreement is up for review in 2026.

Robert Lighthizer, Trump’s former trade representative , has been an informal adviser for the president-elect’s transition and Deputy Prime Minister Chrystia Freeland said they remain in contact.

He has been touted by analysts as an option for several jobs in Trump’s second administration, including a return to the trade file, though Hampson said he is unlikely to go back to the trade representative role.

Hampson said there are still significant questions about how sweeping the tariffs could be and if there will be carve-outs for industries like energy. Trump and his team may also hang the tariff threat over upcoming trade negotiations.

“Is he going to stick us with a tariff Day 1 or shortly after?” Hampson asked.

Some experts have called for Canada to remain calm and focus on opportunities rather than fears. Others have called for bold action and creative thinking.

Canada revived a cabinet committee on Canada-U.S. relations a little more than 24 hours after Trump’s win was secured.

Trudeau said Tuesday in Fredericton that under the first Trump presidency, Canada successfully negotiated the trilateral trade deal by demonstrating that the country’s interests and economies are aligned.

“That is going to continue to be the case,” he said.

This report by The Canadian Press was first published Nov. 13, 2024.



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Toronto Sceptres open camp ahead of second PWHL season |

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The Toronto Sceptres have opened training camp for the upcoming PWHL season, with a new logo, new colours, new jerseys and a new primary venue in Coca-Cola Coliseum. The team has a lot to look ahead to after a busy off-season and successful inaugural campaign. (Nov. 12, 2024)



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