Saturday, March 28th11.7°C
24867

Canadian banks downgraded

Five big Canadian banks and a credit union were downgraded Monday by Moody's rating agency, which believes they will be more vulnerable than in the past if there's a major shock to the economy.

The downgrades, which Moody's had warned were likely to happen, reflect the agency's ongoing concern that Canadian household debt has risen to historical highs -- putting pressure on the institutions' mortgage businesses.

"The Canadian consumer is leveraged almost to the extent that the U.S. consumer was ahead of the housing crash down there some years ago," said Moody's vice-president David Beattie.

As a result, Moody's thinks it's likely that consumers will slow down their borrowing, a major source of business for the banks.

There's also a remote possibility defaults could jump to a dangerous level for the banks if there's a major economic shock that causes a lot of unemployment and a dramatic drop in real estate prices, he said.

"If we thought it was a higher probability, we wouldn't rank the banks as high as we do," Beattie said.

He noted the five banks and the Quebec-based Desjardins credit union remain among the most highly rated of those tracked by Moody's.

Toronto-Dominion Bank (TSX:TD) is the highest rated of the six, at AA1 (down from AAA). Scotiabank and Desjardins drop to AA2 (from AA1), CIBC (TSX:CM), Bank of Montreal (TSX:BMO) and National Bank (TSX:NA) slip to AA3 (from AA2).

A downgrade by a credit rating agency usually means investors will demand a higher interest rate when a company goes to raise cash by issuing bonds or other debt.

The rating agency said National, BMO and Scotiabank face additional risk from the amount of their profit that comes from capital markets operations, which lend large amounts to corporations and advise businesses on debt and stock issues.

Royal Bank wasn't on the list because its long-term deposit rating had already been dropped to Aa3 from Aa1 in June as part of a move to cut the credit ratings of 15 of the world's largest banks, including Bank of America, JPMorgan Chase, Citigroup and Goldman Sachs.

The Canadian Press


Read more Business News




Recent Trending




Today's Market
S&P TSX14812.42-57.38
S&P CDNX681.43+1.87
DJIA17712.66+34.43
Nasdaq4891.22+27.86
S&P 5002061.02+4.87
CDN Dollar0.7928-0.0082
Gold1196.30-8.80
Oil48.43-3.00
Lumber282.40-3.60
Natural Gas2.62-0.05

 
Okanagan Companies
Pacific Safety0.125-0.005
Knighthawk0.010.00
QHR Technologies Inc1.50+0.00
Cantex0.03-0.01
Anavex Life Sciences0.219+0.009
Metalex Ventures0.04-0.01
Russel Metals24.50-0.18
Copper Mountain Mining1.13+0.00
Colorado Resources0.125+0.010
ReliaBrand Inc0.006-0.001
Sunrise Resources Ltd0.045+0.000
Mission Ready Services0.255+0.020
Decisive Dividend Corporation1.80+0.02

 



25185

FEATURED Property
21916961612 Sunrise Road
5 bedrooms 4 baths
$695,000
more details
image2image2image2
Click here to feature your property
Please wait... loading


CRA Notice of Assessment

Many Canadians rush to file their taxes on time each year and don’t think about it until the next year. One of the most overlooked notices received from the CRA annually is the annual Notice of ...


Medical confidential?

If ICBC asks your doctor for your information you may wonder: Can ICBC ask my doctor for my medical information? Can ICBC request a medical report from my doctor without my consent? What is ICBC entit...


Stay out of sales limbo!

Have you ever had a series of good meetings with a prospect … gathered all kinds of information … and given what you thought was a great presentation … only to receive a response ...

_








Member of BC Press Council


24598