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Steven Iarusci

Canadians load up on mortgages, cut card debt - 0 views

  • The bank set aside $145million in provisions for credit losses, down $104-million as more customers repaid their loans.
    • Steven Iarusci
       
      BMO is the bank in question.
  • consumer credit-card balances are declining as bank customers start to heed warnings about taking on too much debt
  • On the residential mortgage side, Mr. Downe said he expects to see growth start to "soften" in the coming months
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  • record household debt levels have left this country vulnerable to economic shocks
  • the Canadian banks will report a slight increase in profit for the quarter as they contend with the impact of declining consumer borrowing, moderating capital markets activity and other headwinds.
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  • With domestic household debt levels hovering close to where they were in the United States prior to the financial crisis, many observers are warning that Canadians need to start paying down debt if the economy is remain on level footing
  • anadian consumers continue to pile on mortgage debt despite repeated warnings that they need to crank back on borrowing if this country is to avoid a painful real estate correction
  • Canadian consumers continue to pile on mortgage debt despite repeated warnings that they need to crank back on borrowing if this country is to avoid a painful real estate correction
  • growth in the overall home loan market "is continuing to be more robust,"
  • Canada's fourth-largest lender on Wednesday kicked off second-quarter bank earnings season with a 7.5% increase in profit on the back of lower provisions for bad loans
Dmitri Tkachenko

National Bank is North Americas Strongest Bank: Bloomberg - 0 views

  •  
    "Canada has five banks in the top 20, with CIBC ranking 4th internationally behind National Bank. Canadian banks have "higher capital ratios than anyone else in the world," Canaccord Genuity analyst Mario Mendonca told Bloomberg. National Bank Pres. & CEO Louis Vachon told Bloomberg: "…size is not everything in financial services," and indeed it's not. National Bank's #1 North American ranking shows that prudent risk management and liquidity are meaningful and a source of confidence for investors and customers alike. Other ranking criteria included non-performing assets, loan-loss reserves, deposits-to-funding, and cost efficiency."
Susan Cui

The Progressive Economics Forum » Housing on the knife's edge - 6 views

  • On the heels of multiple warnings from the Bank of Canada that Canadians have taken on too much household debt for comfort (we hold the dubious distinction of having the worst consumer debt to financial assets ratio among 20 OECD nations), the federal government announced
  • On the heels of multiple warnings from the Bank of Canada that Canadians have taken on too much household debt for comfort
  • the federal government announced
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  • these federal changes will have the greatest effect on middle class Canadians
  • With these moves, the federal government is starting to take seriously the risk of record-high housing prices and record-high household debt.
  • It will reduce the maximum insurable amortization period from 35 years to 30 years
  • The pessimistic possibility is that trying to reign in mortgage debt and housing prices could burst the housing bubble that simultaneously exists in six Canadian cities.
  • The optimistic possibility is that reverting to pre-2006 regulations could help put a lid on house prices
  • to get back to basics and start saving again.
  • It could also force Canadians
  • Between 1980 and 2001, housing prices in four of the six major markets in Canada (Edmonton, Calgary, Ottawa and Montreal) remained in a tight band of between $150,000 and $220,000 (in today’s dollars).
  • experienced three housing price declines between them brought on by interest rate hikes.
  • Toronto and Vancouver
  • When the bubbles burst, they wiped out in the worst case more than 35% of an average house’s value
  • Today it isn’t just Toronto and Vancouver; it’s all six major Canadian cities that are outside of the safety zone.
  • Canada’s housing market is still on a knife’s edge and isn’t clear which way we’ll fall.
Heshani Makalande

Canadians to get rate hike reprieve - Moneyville.ca - 0 views

  • The Bank of Canada is widely expected to leave its key benchmark interest rate unchanged next Tuesday — and may even sit on the sidelines until September, economists say
  • Even if the central bank leaves its overnight rate unchanged at 1 per cent next week, it’s likely to again warn consumers that the clock is ticking: interest rates will be going up; it’s just a matter of when.
  • “One per cent is not normal. Everybody realizes that. Rates will go up,”
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  • Late last year, and even at the beginning of 2011, economists were certain that the Bank of Canada would start increasing its overnight rate this spring. That was pushed to the summer amid continuing worries about the health of the U.S. economy.
  • Now more economists are expecting that the central bank will take a pass at its July policy meeting as well, and begin raising rates in the fall.
  • The central bank is nervously contemplating the continuing European debt restructuring, attempts by China to tame inflation, the impact that will have on commodity prices, and the still-fragile recovery in the U.S.
  • In particular, the U.S. may be susceptible to supply chain disruptions as a result of the earthquake and tsunami in Japan, and the resulting nuclear disaster
  • “The second quarter didn’t start well and the earthquake will weigh on the rest of the quarter. For now Q2 is not looking that great, and when the U.S. doesn’t do well, it affects Canada as well,” Rangasamy said.
  • In Canada, the economy is still expected to expand by a healthy 3.2 per cent in 2011 and 3.1 per cent in 2012, according to the Royal Bank of Canada. Inflation also remains tame, thanks in part to a buoyant loonie.
  • The central bank has been anxious to raise interest rates in order to keep a lid on household debt, which has reached record levels in Canada.
Benjamin Gray

Age of outperformance ends for Canadian banks - The Globe and Mail - 0 views

  • Between 1990 and 2010, the Canadian prime rate declined by more than 10 percentage points, while inflation fell significantly. The result was a near-perfect environment for financial assets, pushing values for stocks and bonds ever higher.
  • Empowered by the regulator, the Canadian banks have leveraged their massive size and distribution powers to dominate virtually all the financial services sector.
  • The combined outcome was an explosion in trading and market-sensitive revenues, which grew by more than 15 per cent a year for two decades, and today are approximately 20 per cent of gross revenues. Although the process is not quite complete, the banks are also well on their way to dominating the domestic mutual fund business.
Joey Keum

Canadian HR Reporter - Article - February job growth weaker than expected - 1 views

  • Net employment gains in the month were a modest 15,100, below market forecasts of a 21,000 increase, said a Statistics Canada report.
  • he report disappointed hopes that hiring momentum in the previous two months would persist. Net job gains were 69,200 in January and 30,400 in December.
  • Canada has recovered jobs lost during the recession faster than the United States but the February data bucked that trend.
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  • The labour market is not going to create any further inflationary pressure, either coming from wage (gains) or the general strength in the labor markets," said Sebastien Lavoie, assistant chief economist at Laurentian Bank Securities.
  • In further signs of slowing, Canada's labour report said the economy shed 24,000 full-time positions in February, partially offset by the addition of 39,000 part-time jobs. The number of self-employed workers rose, while the number working in the private sector edged lower.
  • The February jobless rate was unchanged at 7.8 per cent, versus the 7.7 per cent forecasts by analysts in a Reuters poll.
  • The average hourly wage of permanent employees — which is closely watched by the Bank of Canada for inflation pressures — rose 2.5 per cent from February 2010, up from 2.3 per cent year-on-year rate in both January and December.
  • "It probably lowers the probability of any near term tightening by the Bank of Canada and as a result (will) probably weigh on the Canadian dollar," said Paul Ferley, assistant chief economist at the Royal Bank of Canada.
naheekim

Canadian household debt swells to $1.3 trillion - CBC News - 1 views

  • Canadians are increasingly relying on credit cards and credit lines to finance day-to-day expenditures, and the total national household debt in Canada has reached an all-time high of $1.3 trillion,
  • The survey found that 42 per cent of respondents said their personal debt was rising in the past three years, and 21 per cent said they couldn't manage their debt
  • Some 58 per cent of respondents said that day-to-day living expenses are the main cause for the increasing debt.
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  • The survey interviewed 2,014 people and had a margin of error of 2.2 per cent, 19 times out of 20.
  • Third of non-retired Canadians report not saving
  • Many Canadians are not aware of how the economic downturn has impacted their financial situation and continue to load up their credit cards and lines of credit
  • The report finds that 32 per cent of non-retired respondents said they were not devoting any funds toward saving, even for retirement, up from 25 per cent in 2007
  • Of those making under $35,000 a year, 49 per cent surveyed reported that their debt levels rose in the last three years. In comparison, 42 per cent of those making $35,000 to $75,000 a year reported their debt levels rose, while 38 per cent of those making over $75,000 annually reported an increase
  • Personal lines of credit expanded to a new high of $181 billion outstanding in April, an increase of 6.2 per cent year-to-date, and up 20.4 per cent from a year earlier. This type of debt has bloated from $100 billion five years ago and less than $50 billion at the start of the decade.
  • Personal loans from banks totalled $48.5 billion, up 8.1 per cent from a year earlier, and bank credit-card receivables were up 8.9 per cent at $51.5 billion.
Maria Li

Rate hikes okay for most but a 'financial shock' for many - The Globe and Mail - 0 views

  • Most Canadians should be able to handle higher interest rates expected later this year, but many will still see a "financial shock," Toronto-Dominion Bank economists say
  • "The main question is how households will respond to the eventual rebalancing of monetary policy, TD economists Craig Alexander and Diana Petramala write in a new report that looks at indebtedness among Canadian households.
  • Canadians will experience a financial shock when interest rates eventually rise, but the vast majority of households should be able to cope so long as interest rates rise only gradually
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  • Bank of Canada held its benchmark overnight rate steady at just 1 per cent, citing global uncertainty and the impact of the strong Canadian dollar, but said rates must eventually rise
  • Annual personal credit growth slowed to a year-over-year pace of 6.4 per cent in April, compared to an average 10.9 per cent in a period spanning 2004 to 2008
  • The moderation in credit growth has been evident in all measures of debt
  • The debt-service ratio, the interest households must pay on their debt each month as a share of personal disposable income, climbed to a two-year high of 7.6 per cent in [the first quarter of] 2011, despite still record low interest rates.
Heshani Makalande

Canadian debt load: $26,000 - excluding mortgages - Moneyville.ca - 0 views

  • Already at record levels, Canadians now owe just under $26,000 on average on their lines of credit, credit cards and auto loans, according to credit rating agency, TransUnion.
  • That’s an increase of 4.5 per cent, or another $1,000, over the same period last year.
  • The fear is that higher rates could push more consumers beyond their ability to repay their loans
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  • Debt growth in Canada is slowing from the double-digit pace seen before the recession
  • And total borrowing, including mortgages, typically the biggest household loan, is slowing, major Canadian banks said recently in their quarterly reports.
  • The Bank of Canada’s trend-setting overnight lending rate is just 1 per cent. But with inflation running at 3.3 per cent, above the central bank’s ideal range, Carney is under pressure to start raising lending rates to dampen demand.
  • Total debt per consumer increased to $25,597 in the first three months of this year,
  • Among types of loans, TransUnion said credit card debt, usually the most expensive to carry, barely budged from a year ago, falling $25 to an average of $3,539.
  • In a sign some borrowers may already be struggling, the national credit card delinquency rate rose 11 per cent. The rate measures the ratio of consumers who take 90 days or more to pay their bill.
  • The average line of credit, the most popular loans for their low cost and high flexibility, rose 5.9 per cent to $33,762 compared to last year. However, total line of credit debt declined for the first time in five quarters.
  • One noticeable shift was the decreased use of lines of credit, Higgins said. The category is the largest among consumer loans, making up 41 per cent of the total, and even more in Ontario, at 57 per cent
  • The study found debt loads rose in all provinces, led by Quebec and Newfoundland and Labrador. British Columbians had the highest load at $36,649.
  • Lines of credit are the most popular form of consumer debt, excluding mortgages, accounting for more than 41 per cent of outstanding debt at the end of the first quarter. Debt on lines of credit stood at an average $33,981, up 5.9 per cent from $31,867 in the first quarter of 2010.
Carolyne Wang

How paying people's way out of poverty can help us all - The Globe and Mail - 0 views

  • there’s an increasing awareness, among even the country’s most wealthy, that poverty reaches beyond the tables of the hungry and digs into their own pocketbooks
  • When people are poor, out of work or homeless, it hurts the bottom line of all Canadians. And as the country struggles to maintain a shaky recovery amid growing global economic uncertainty, that’s not a hit they can afford to take.
  • If Ottawa and the provinces fail to make this a priority, Tory Senator Hugh Segal predicts, “over time, we will begin to run out of the money that we need to deal with the demographic bulge because it will be consumed in the health care requirements of the poor, which will increase. It will be consumed in the costs of the illiteracy and unemployment which relate to poverty. ... And it'll be unsustainable.”
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  • It’s already on the radar of some provinces: One of Christy Clark’s first actions as B.C. Premier was to raise the province’s minimum wage for the first time in a decade and offer a tax cut for low-income families. Ontario has launched a sweeping review of social assistance programs that Community and Social Services Minister Madeleine Meilleur has admitted are failing the province’s neediest.
  • Despite Canada’s reputation for a strong social safety net, the country is becoming economically polarized. And the decades-old dominant economic dogma that growing wealth among society’s highest earners would trickle down to those less fortunate is being challenged by an alternative approach: Eliminate crushing poverty among the lowest earners, and wealth will trickle up.
  • The ranks of the working poor have swelled as minimum wages fail to keep pace with rising costs and social assistance levels drop.
  • The recession widened the chasm, and a subsequent recovery hasn’t closed it.
  • On paper, almost as many jobs have been added as were lost during the financial crisis. But they offer fewer hours and less pay – and some of the hardest-hit sectors aren’t coming back.
  • Food bank use hit a record high in 2010. Tellingly, more of the people using those food banks have jobs – they just don’t make enough to pay the bills or feed their families.
  • As the incomes of the country’s top earners have risen, the incomes of Canada’s lower- and middle-income earners have stagnated.
  • Tony Masciotra is diversifying himself. The Argentine-Canadian father of two went back to school immediately after being laid off from his tool and die job at Ford Motor Co. in Windsor three years ago.
  • “I have records of over 100 jobs I have applied for,” he said. “I have looked really hard. ... But I haven’t been able to get a job yet.
  • Mr. Masciotra is part of a growing group of skilled labourers on the brink. The métiers in which they’ve worked for years are no longer economically viable: Many well-paying blue-collar jobs are being replaced by minimum-wage, service-sector ones. And that’s causing significant shifts on both sides of the border, notes MIT economist David Autor.
  • It gets more complicated, and more economically detrimental, if the people who’ve lost jobs aren’t the ones being hired to new ones.
  • They enter what Robin Somerville of the Centre for Spatial Economics calls “structural unemployment.” And if they leave the workforce entirely, they fall off the radar of unemployment stats: The numbers look better precisely because they’re worse.
  • The drop is even more significant because more Canadians are putting off retirement. That should mean more people in the workforce. But it doesn’t: So many younger workers are dropping out entirely that they outweigh the older ones sticking around longer.
  • “If you’re losing opportunities in some areas, and you’re not replacing them with opportunities of equal or greater value, then the overall level of income in the economy is reduced. And the ability of people to go out and buy goods and services is reduced.”
  • Homelessness costs taxpayers money – in both foregone wealth and social service spending.
  • Some see a solution in a 40-year-old experiment: In the 1970s, Manitoba wanted to see what would happen if it guaranteed poor people in a few communities a set annual income.
  • The philosophy behind this is simple: People are more likely to stay in school, out of emergency rooms and out of jail; they contribute to the economy through their purchases; they’re more likely to move eventually above the poverty line and pay taxes.
  • The irony is that Canada already scores high compared to other OECD countries when it comes to helping the elderly. Where it falls short is where it matters: The working-age poor – the ones who should be contributing to the economy.
  • $134,000 Estimated amount for emergency shelter, emergency hospital care, law enforcement and other social services for one homeless person in Calgary, for one year
  • $34,000 Estimated cost to proide supportive housing for one person in Calgary, for one year
  • $12,555 Average cost of hospital stay for non-homeless patient at St. Michael's Hospital in Toronto
  • $15,114 Average cost of hospital stay for homeless patient at St. Michael's Hospital in Toronto
Noah Schafer

Jobless rate, global uncertainty to test Tories' economic strategy - thestar.com - 0 views

  • The new Conservative government’s business-friendly economic strategy will be tested by uncertain global conditions and a stubbornly high jobless rate in Canada. One of the first items on Prime Minister Stephen Harper’s agenda when Parliament re
  • The new Conservative government’s business-friendly economic strategy will be tested by uncertain global conditions and a stubbornly high jobless rate in Canada.
  • n February, Canada’s output sank by 0.2 per cent, the worst monthly performance since May 2009.
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  • One of the first items on Prime Minister Stephen Harper’s agenda when Parliament returns will be reintroduction of a $278 billion budget that includes a sprinkling of social and economic spending and a plan to slay the budget deficit in several years. And the government will continue with a $6 billion corporate income tax cut.
  • “The risks still lie outside the Canadian border, which as we’re well aware can have a spillover effect on Canada,” said Royal Bank chief economist Craig Wright.
  • “We’re seeing continued uncertainty and concerns still with respect to the Eurozone and where it’s headed,” he said. Uncertainty on economic growth is also being fanned by volatile energy markets and the questionable U.S. business rebound, Wright said.
  • Prospects for Canada are also complicated by expectations that spending by debt-burdened consumers could slow in 2011 and by the shut-off of the Conservatives’ two-year, $47 billion emergency stimulus program.
  • With government spending slowing, the Conservatives have staked a great deal on their view that the business community will pick up the slack and stimulate the economy with expansion-minded investments.
  • Besides phasing in corporate income tax cuts worth $14 billion by 2012, the Conservatives in recent years have provided a wide range of investment incentives for business, including easing taxes on small business and manufacturers. In all, tax cuts for business by the Conservatives total an estimated $60 billion by 2013.
  • both Flaherty and Bank of Canada Governor Mark Carney have pointedly talked about the urgent need for more spending on machinery and equipment by companies.
  • But many are not convinced, with some Canadians saying the government would be smarter to tie tax incentives directly to company investments to ensure that corporations don’t just pocket the extra profits.
  • Speaking of corporate tax cuts, Canadian Association of Social Workers spokesperson Fred Phelps said it would be one thing “if corporations turned around and invested those funds into the economy.” But he said that hasn’t been happening in recent years. “What really has driven us out of the recession,” he said, “is spending by households and government, not business.”
Linda Lei

Executives should monitor household debt - Ivey Business Journal - 0 views

  • Household debt is the personal and mortgage debt of Canadian consumers.  It has been on a tear.  According to Statistics Canada, Canadian household debt reached a record 148 percent of disposable income in the third quarter of 2010 before closing the year at 147 percent.  It was 50 percent in 1990 and 110 percent in 2000
  • The Bank of Canada estimates home equity lines of credit and loans may be up as much as 170 percent in the last decade while mortgage debt at is about half that rate.  Home-equity lines of credit and loans are now about 12 percent of household debt and often end up financing non-housing related purchases like vacations and vehicles.  At the margin, too many Canadians are living off their homes.
Linda Lei

Stories tagged "Consumer Debt" | Financial Post - 1 views

  • Despite repeated warnings from Bank of Canada governor Mark Carney, Canadians continue to ratchet up personal debt, leaving the country increasingly vulnerable to economic shock.
  • Growth in residential mortgages, the biggest single asset of all the major banks, “is continuing to be more robust,” Bill Downe, chief executive of Bank of Montreal, said in an interview.
Linda Lei

Consumer debt and home equity | Direct Talk with Peter Aceto - 0 views

  • Here are some facts. In this low interest rate environment, Canadians’ debt levels – including credit cards, loans and mortgages – have grown much faster than their incomes. Debt levels are now about one and a half times disposable income, an even higher level than the debt-to-income levels of Americans. Total consumer debt in Canada now exceeds a staggering $1.4 trillion. The Bank of Canada and the Finance Department have expressed concern about personal debt, specifically about what would happen if interest rates were to rise and Canadians discovered they could not afford to be carrying these debt levels.
Linda Lei

Canada Tightens Mortgage Rules to Curb Household Debt - Businessweek - 0 views

  • Jan. 17 (Bloomberg) -- Canadian Finance Minister Jim Flaherty tightened rules to restrain record household borrowing, giving the Bank of Canada more scope to extend a pause in interest rate increases.
  • Flaherty said today Canada will shorten the maximum amortization period for government-insured mortgages to 30 years from 35 years, lower the maximum amount homeowners can borrow against the value of their homes, and withdraw its insurance on home-equity lines of credit
Mike Seo

Canada exporters face headwinds, new minister says | Reuters - 1 views

  • the strong currency and growing competition from emerging economies could stall the country's export growth.
  • Canada's trade-reliant economy has fully recovered from the recession but growth has been restrained by the exchange rate with the U.S. dollar, which erodes exporter competitiveness.
  • The central bank chief and finance minister have been hounding businesses to find ways to compete with the new normal of a currency on par with the U.S. dollar. These include investing in new technologies and taking other steps to outperform global competitors.
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  • Perrin Beatty, chief executive of the Canadian Chamber of Commerce and a former Conservative cabinet minister, warned Canada's dismal productivity rate, which he said is about 25 percent below that of the United States, was the biggest problem facing exporters.
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