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Canada’s biggest banks stand by resilience of mortgage portfolios

Canada’s biggest banks stand by resilience of mortgage portfolios

OTTAWA: Canada’s biggest banks are stressing the resilience of their mortgage portfolios, saying they can cope with the effects of regulatory curbs which have checked rampant house price growth in the world’s tenth largest economy. Property prices had been going up in Canada, more or less without interruption, for the past 17 years, buoyed by waves of immigration, low interest rates and lax controls on foreign money. But now indices have begun to sag, in the wake of policy packages from city, provincial and national governments and after the Bank of Canada raised rates for the first time since 2010. The benchmark price index in the greater Toronto area slipped for a third successive month in July, down 4.6 per cent, while sales transactions dropped 40 per cent from the same period a year earlier. In light of “drastic” measures by policymakers the mood among investors has grown more cautious, said Anthony Scilipoti, chief executive of Veritas, Canada’s largest independent equity research firm. “What you have to do is protect yourself from the worst,” he said. “You lighten your exposure to credit, you lighten exposure to . . . banks.”

Last week executives at two of the top six banks — Royal Bank of Canada, and Canadian Imperial Bank of Commerce — dismissed fears of the effects of a sharp correction, saying that they had built defences able to withstand a serious slump. At CIBC, for example, chief risk officer Laura Dottori-Attanasio noted that the bank’s newly originated mortgages had lower loan-to-value ratios than the national average, providing some protection in the event that prices continue to fall. Analysts expect similar assurances from executives at the remaining four big banks this week, as they present figures for their third quarters ending in July. Bank of Montreal and Bank of Nova Scotia report on Tuesday, National Bank of Canada on Wednesday and Toronto-Dominion, the biggest in the country, brings down the curtain on Thursday.