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.
“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.”
Edited BY Harry Miller
Coronavirus infections in Canada surpass 108,100 as global case count tops 13 million – Globalnews.ca
The number of novel coronavirus case surpassed 108,100 on Monday, as worldwide infections topped 13 million.
Across the country, 366 new cases of COVID-19, and 12 additional deaths linked to the virus, were reported.
Ontario reported the most new cases of COVID-19 on Monday, with 116 new infections. The province also saw three additional deaths.
According to the province’s health authorities, 129 people have also recovered from the virus.
So far, 1,712,315 people in Ontario have been tested for the novel coronavirus.
Meanwhile, in Quebec — the province hit hardest by the pandemic — 100 new infections were reported on Monday.
According to provincial health authorities, one more person died.
So far, a total of 25,911 people have recovered from the virus in Quebec.
Saskatchewan reported 56 new cases of COVID-19 on Monday. The province has seen 15 coronavirus-related deaths since the pandemic began, and has tested more than 75,100 people.
So far, 766 people have recovered from the virus in Saskatchewan.
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Health authorities in Alberta reported 72 new cases of COVID-19 on Monday, and said one more person had died, bringing the total death toll to 161.
More than 540,100 people have been tested for the virus, and 7,989 people have recovered from infections
Health officials in B.C reported 62 new cases of COVID-19 in the province over the last 72 hours, and two deaths, both which occurred in long-term care.
There were 21 cases from Friday to Saturday, 20 cases Saturday to Sunday, and 21 from Sunday to Monday.
So far the province has conducted 219,601 tests, and 2,718 people have recovered from the virus.
Neither New Brunswick nor Nova Scotia reported new cases of COVID-19 on Monday.
In New Brunswick, 46,489 people have been tested for the virus and 163 people have recovered from infections.
Two people have died from the novel coronavirus in New Brunswick since the beginning of the pandemic.
A total of 58,741 people have been tested for COVID-19 in Nova Scotia, and 1,000 people have recovered from the virus.
Manitoba reported no new cases of COVID-19 and no new deaths related to the virus on Monday.
So far the province has conducted 71,559 tests for the virus and 317 people have recovered from infections.
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Health officials in Prince Edward Island said one new case of COVID-19 had been confirmed, but reported no new deaths on Monday.
Since the pandemic began, 14,810 tests have been conducted and 27 people have recovered from the virus on the island.
Newfoundland reported no new cases of COVID-19 on Monday marking three full days without a new infection.
The province has tested 20,583 people for the virus so far, and 258 have recovered from infections.
According to health authorities, a total of three people have died as a result of COVID-19.
Live updates: Coronavirus in Canada
Neither the Northwest Territories or Nunavut reported new cases of COVID-19 on Monday.
So far, the Northwest Territories has not seen any COVID-19-related deaths, and has tested 2,859 people for the virus.
A total of five people have recovered from infections in the territory.
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Meanwhile, in Nunavut, 1,553 tests have been conducted.
No new cases of COVID-19 or deaths related to the virus were reported in Yukon on Monday.
An update on the Territory’s website says 1,343 people have been tested for the virus, and 11 people have recovered.
Global cases top 13 million
The pandemic reached another grim milestone on Monday, with more than 13 million confirmed cases reported globally.
According to a tally from John Hopkins University, by 8 p.m. ET on Monday, 13,060,239 cases of COVID-19 had been confirmed around the world.
COVID-19 cases have continued to increase in several places around the globe, including in the United States, which remained the epicentre of the virus on Monday.
The U.S. now has more than 3.3 million confirmed cases of COVID-19.
Coronavirus: Trump says he has a ‘very good relationship’ with Dr. Fauci
Speaking to reporters outside Rideau Cottage in Ottawa on Monday, Prime Minister Justin Trudeau said the “complex” situation in the U.S. means there is still no firm timetable, at this time, for when the border will be reopened to non-essential travel.
The virus forced mass closures around the globe and devastated the world economy.
In the last several months, however, many countries — including Canada — have made steps to gradually reopen.
© 2020 Global News, a division of Corus Entertainment Inc.
Where the jobs are: Some sectors rebounding faster as Canada emerges from lockdown – CTV News
Jobs lost during the early stages of the COVID-19 pandemic are coming back – but not all at once, and not in the same order they disappeared.
Statistics Canada reported July 10 that more than 950,000 jobs were added in the country in June. While only a small fraction of the three million or so positions that were lost as lockdowns were imposed in March and April, the number represents a record increase as those measures are lifted.
“There’s a lot of places that are still hiring amidst all the doom and gloom that we’ve been experiencing over the past few months,” Carolyn Levy, president of the technologies division of staffing and recruitment agency Randstad Canada, told CTVNews.ca on Monday via telephone from Calgary.
Breaking down the numbers by industry yields clues into where the first wave of rebound hiring is taking place. More than 20 per cent of the added jobs were classified as wholesale and retail trade – with 16 per cent in accommodation and food services, 12 per cent in health care and social assistance, and eight per cent apiece in construction and manufacturing.
This suggests that the retail and restaurant workers who were among the first to be let go when their establishments were ordered to close were also among the first to be hired back when limited activity was allowed to resume.
There is still a long way to go before those sectors can be back to normal, though. In food services alone, it is believed that 400,000 Canadian jobs eliminated during the pandemic have yet to return. Many businesses in the broader service sector say they do not expect to ever return to pre-pandemic staffing levels.
Also notable, StatCan found, is that there were more wholesale jobs in Canada in June than there were in February, before the pandemic hit. Levy chalked this increase up to the surge in online shopping, which has left companies needing extra staff in warehouses and other parts of the supply chain.
On manufacturing, Levy said the increase could be due to companies retooling their lines to produce personal protective equipment or other items suddenly in demand due to the pandemic.
EMPLOYERS RETHINKING OLD ROLES
For the nearly 2.5 million Canadians who remain unemployed, though, knowing where hiring has recently happened only paints part of the picture. More helpful is information about where hiring is happening now.
According to the federal government’s job bank, the most in-demand jobs right now are sales associates, administrative assistants and customer service representatives, followed by truck drivers, general farm workers and light-duty cleaners.
A popular website used by job-seekers to connect with employers is seeing similar patterns. Brendon Bernard, an economist with the Indeed Hiring Lab, wrote July 7 that retail and customer service jobs are among those that saw the biggest drop in new postings on Indeed earlier in the pandemic, and have since seen some of the biggest rebounds.
“Sectors narrowing the gap relatively quickly in recent weeks include ones featuring lower-paying positions, like retail, and customer service,” he wrote.
“Areas posting roles with many mid-wage jobs have also seen noticeable bounce-backs, like construction, as well as education and instruction.”
Levy said that some employers are also creating new roles as they look to respond to their customers’ needs during and after the pandemic. Opportunities created by this include more positions for financial advisers, she said, as well as an even greater demand for tech workers.
Postings on Indeed for higher-paying jobs have been slower to bounce back, Bernard said. Indeed has tracked two categories where new job postings have fallen off since early May – security and public safety, and aviation.
Bernard reported that the number of new job postings on Indeed as of July 3 was 21 per cent lower than it had been one year earlier. That gap had been as large as 70 per cent in mid-April. Smaller provinces, which have generally been less affected by COVID-19, have kept job posting levels closer to where they were in 2019 than larger provinces.
Levy said she is seeing employers increasingly show interest in hiring for temporary contract positions. This benefits them because it allows them to avoid making long-term commitments in an uncertain environment, she said, but can also be good for those looking for jobs because it gives them a chance to find work that they might not otherwise have.
“Companies have had to take a step back and start to reimagine how they have to work in this new normal,” she said.
“Businesses have to look at what do we need to do to reskill, what do we need to do to retrain, given the way we operated our business four months ago is not the way it’s going to be … from now on.”
Talks to extend Canada-U.S. border closure "ongoing," Trudeau says after call with Trump – CTV News
With just one week to go until the current Canada-U.S. border closure agreement expires, Prime Minister Justin Trudeau says border discussions with the U.S. are “ongoing,” adding that he expects to have more to say later in the week.
This comes as Trudeau spoke to U.S. President Donald Trump on Monday morning, though the border was not among the range of topics the prime minister said the two world leaders discussed — despite the looming July 21 deadline.
“Every month we have been able to extend the border closures to all but essential goods and services and those discussions are ongoing with the United States right now as we are a week from the next deadline for closures,” Trudeau said.
“We’re going to continue to work hard to keep Canadians safe and to keep our economies flowing, we will have more to say later this week I’m sure.”
Canada has been under renewed pressure to reopen the shared border, despite surging COVID-19 case numbers in the United States. At the end of June, the U.S. became home to the world’s highest number of reported infections: more than 2.2 million. That number has since soared to more than 3.3 million, according to the New York Times, with more than 134,000 deaths.
Despite these figures, 29 bipartisan members of U.S. Congress penned an open letter to Public Safety Minister Bill Blair calling on the Canadian government to plan a phased reopening of the Canada-U.S. border and to consider easing existing measures.
“We are asking that the United States and Canada immediately craft a comprehensive framework for phased reopening of the border based on objective metrics and accounting for the varied circumstances across border regions,” read the letter, which was published on Western New York Congressman Brian Higgins’ website on July 3.
The members of Congress, who represent the northern states along the border, also implored the Canadian government to consider easing restrictions on family members and property owners impeded by the restrictions.
The Canadian government pushed back on the request, with Deputy Prime Minister Chrystia Freeland’s office telling CTVNews.ca in a statement that the health and safety of Canadians is “absolutely priority.”
“Decisions about Canada’s border are made by Canadians, for Canadians,” Freeland’s spokesperson Katherine Cuplinskas said in the statement on Friday.
The suggestion was also unpopular with non-politician Canadians, who took to social media to express their staunch opposition.
In response to a tweet from Higgins, who had shared the open letter on his Twitter account, hundreds of Canadians slammed the suggestion.
“No thank you…clean up your backyard before you attempt to enter ours..sincerely Canada,” wrote a user who goes by the name @MichelletypoQ.
Another user, @rachelinTO, wrote that “most of our earliest cases came from the U.S. So……that’s a firm ‘no’. Sorry, eh.”
Users called the request “disastrous” and multiple accounts said they’d only be comfortable easing restrictions after seeing improvement in the number of COVID-19 cases in the U.S.
TRUMP, TRUDEAU DISCUSS TARIFF THREAT
While Trudeau did not give any indication in his press conference that he and Trump had touched on the border issue during their phone call on Monday, he did confirm that the two discussed a host of other issues — including China and the two detained Canadians, the Black Lives Matter movement, and the U.S. president’s renewed aluminium tariff threat.
“I impressed upon him that it would be a shame to see tariffs come in between our two countries at a time where we’re celebrating NAFTA , and at a time where we want our businesses and our manufacturers to get going as quickly as possible,” Trudeau said.
“We pledged to keep working on it together.”
Trudeau also said he told Trump that the pandemic had disrupted the usual supply chains and manufacturing processes, but that this disruption is slowly subsiding.
“That is starting to realign itself, given the economies are starting up again and manufacturing is getting going,” Trudeau said.
CTV News confirmed the possibility of the U.S. slapping another set of tariffs on Canada at the end of June. The tariffs would fall under Section 232 of the U.S. Trade Expansion Act, and the threat comes amid U.S. claims that their aluminum market is being flooded by Canadian product.
Two Canadian sources told CTV News at the time that the announcement is possible in the coming weeks, though to date no formal announcement of tariffs has transpired.
Should the U.S. decide to re-impose tariffs on Canada, it would reopen a trade rift between the two countries that had been healing since a spat just over a year ago, that saw the U.S. impose tariffs on steel and aluminum and Canada answer with tariffs on a wide array of U.S. products including quiche, mayonnaise, and toilet paper.
Trudeau has been outspoken in his defence of Canada’s aluminum industry, noting when the possibility of the U.S. imposing new tariffs emerged recently, that the U.S. “needs Canadian aluminum” and would only be hurting its own economy.
“Our economies are so interlinked that punitive actions by the United States administration end up hurting Americans the same way they end up hurting Canadians,” Trudeau said at the time.
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