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

Published : Sunday, 31 May, 2020 at 11:24 PM  Count : 163

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

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


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 epidemics such as school and business closures, border closures and travel restrictions would stifle economic activity, but the quarterly financial results of banks in the three months to April 30 were highly anticipated because they sank just as badly as the economy did.

If businesses like manufacturers, oil and gas companies, retailers and tech startups have trouble paying their bills, it appears in the big banks, which lend them.

Analysts say one of the best ways to build on how companies are doing is to focus on banking metrics, known as loss reduction provisions. This is a complex term for a basic simple concept: how much banks have set aside in their books to repay loans, which they think will never be refunded.

All these loans will not turn into a loss. But focusing on exactly how much banks are putting aside is a great proxy for how much concern they have.

Collectively, Canada's top five lenders spent about 11 11 billion quarterly to cut quarterly, which is not being paid as planned. That's about five times as much as they did for bad loans during the same three months last year.-Internet





GY

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