Canada’s chartered banks took a combined multibillion-dollar earnings hit Thursday, driving down stock markets in Toronto amid growing fears of a recession that could result in a deluge of bad loans..Royal Bank of Canada, TD and CIBC all reported lower second quarter earnings numbers on Thursday, following lower numbers from Bank of Montreal and Scotiabank the day before..All told, the country’s five biggest banks took a combined $5.92 billion drop in profits even as they had increase provisions for bad loans — money set aside to cover potential losses — by $3.3 billion. Despite the lower numbers, only CIBC met analyst expectations on a per share basis due to better than expected income from its personal and business banking arm..Results for the sector were exacerbated by US banking failures, the failure of Credit Suisse and the threat of a government debt default south of the border. Although Canadian banks are considered to be insulated from similar weakness, all of this country’s institutions have various operations in the US..On this side of the border, slowing loan growth and exposure to the commercial real estate sector are fuelling recession fears, tracking similar trends in the US that could impact the North American economy as a whole..The Bank of Canada flagged all those risks in its annual financial system review earlier this month..“As the financial sector adjusts to higher interest rates, participants, regulators and central banks must be more vigilant about vulnerabilities and risks,” it wrote. .“A large negative shock, such as a severe global recession with significant unemployment that further depresses house prices, could increase loan defaults among households. If defaults on uninsured mortgages with negative equity were to occur on a large scale, they could result in sizeable credit losses for Canadian lenders.”.Consequently, Canadian bank stocks drove down the entire TSX on Thursday, which was down about 2%. TD led the race to the bottom, dropping nearly 4% or $2.98, followed by RBC which was down $3.46 or nearly 3%. .By contrast, CIBC was up about 2.5% or $1.36 to $57. Scotiabank and BMO were relatively unchanged, at $66.14 and $113.19, respectively.
Canada’s chartered banks took a combined multibillion-dollar earnings hit Thursday, driving down stock markets in Toronto amid growing fears of a recession that could result in a deluge of bad loans..Royal Bank of Canada, TD and CIBC all reported lower second quarter earnings numbers on Thursday, following lower numbers from Bank of Montreal and Scotiabank the day before..All told, the country’s five biggest banks took a combined $5.92 billion drop in profits even as they had increase provisions for bad loans — money set aside to cover potential losses — by $3.3 billion. Despite the lower numbers, only CIBC met analyst expectations on a per share basis due to better than expected income from its personal and business banking arm..Results for the sector were exacerbated by US banking failures, the failure of Credit Suisse and the threat of a government debt default south of the border. Although Canadian banks are considered to be insulated from similar weakness, all of this country’s institutions have various operations in the US..On this side of the border, slowing loan growth and exposure to the commercial real estate sector are fuelling recession fears, tracking similar trends in the US that could impact the North American economy as a whole..The Bank of Canada flagged all those risks in its annual financial system review earlier this month..“As the financial sector adjusts to higher interest rates, participants, regulators and central banks must be more vigilant about vulnerabilities and risks,” it wrote. .“A large negative shock, such as a severe global recession with significant unemployment that further depresses house prices, could increase loan defaults among households. If defaults on uninsured mortgages with negative equity were to occur on a large scale, they could result in sizeable credit losses for Canadian lenders.”.Consequently, Canadian bank stocks drove down the entire TSX on Thursday, which was down about 2%. TD led the race to the bottom, dropping nearly 4% or $2.98, followed by RBC which was down $3.46 or nearly 3%. .By contrast, CIBC was up about 2.5% or $1.36 to $57. Scotiabank and BMO were relatively unchanged, at $66.14 and $113.19, respectively.
