Slow recovery in housing market limits mortgage growth for major banks
Scotiabank analyst Mike Rizvanovic surveyed the domestic housing market from the major bank perspective,
'The latest statistics on Canada's residential housing market showed some positive signs, with slightly better sales activity relative to the prior year and stable inventory levels. However, the market is certainly not rebounding as much as had been hoped for in the spring/summer lending season, which, coupled with another month-over-month decline in the dollar volume of transactions, reinforces our view that mortgage lending growth in the domestic market is likely to remain relatively modest through F2026. We continue to model low single-digit mortgage growth for the banks next year, which we view as only a modest revenue headwind … Home sales across Canada climbed 7 per cent year-over-year but fell 4 per cent month-over-month (not seasonally adjusted) and remained well below historical levels for the month of July (down 18 per cent and down 16 per cent, respectively vs. the previous five-year and 10-year averages) … Indexed home prices in Canada overall were down 0.7 per cent month-over-month and fell by 3.4 per cent year-over-year. The GTA continues to be a big laggard with prices falling a further 1.4 per cent sequentially in July, bringing its aggregate decline to 23% vs. the early 2022 peak … Regulatory data shows relatively modest month-over-month growth in real estate–secured loans (RESL) in Canada, which for the large banks was up 0.5 per cent in June, a slight improvement from 0.3 per cent in May, with year-over-year growth in the 4-per-cent range … Among the large banks, TD outperformed through the first two months of the quarter with 1.4-per-cent growth, followed closely by NA and RY. For the smaller banks, LB had a 1.3-per-cent improvement quarter-to-date, while EQB lagged with a 0.7-per-cent decline, largely on weakness in insured lending, which is not a priority for the bank … We believe that more relief on interest rates is needed before we see a constructive outlook for domestic mortgage growth for the Canadian banks'
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BofA Securities commodity strategist Clifton White predicts a major turnaround for Canadian natural gas prices,
'It has been a rough market for Canadian natural gas bulls, as AECO (the main Western Canadian gas hub) has averaged just $1.1/mmbtu since January 2024, and current prices are near the lowest ever seen. Production growth expanded more than 1 Bcf/d year-over-year this year, outpacing demand growth … Although we are cautious on U.S. gas pricing in 2026 due to recent record production and increasing U.S. E&P gas activity (see the report, Nat gas production déjà vu all over again), AECO might have a more constructive story. Historically, the only outlet for excess Western Canada gas has been via pipelines to the US or Eastern Canada. Now LNG Canada will provide direct access to global markets. LNG Canada is a 2-train project with estimated feedgas demand of 2.1 Bcf/d, or more than 10 per cent of Western Canadian gas production. This large project is finally starting operations following delays in construction, and we believe it will cause Western Canada inventories to flip from near record highs this fall to near 10-years lows by the end of summer 2026. As such, we believe a storage deficit will lead to stronger AECO prices and fewer Canadian exports to the U.S. next year'
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BMO senior economist Sal Guatieri sorted through prices at the grocery store,
'Canadian food prices are starting to percolate again, up 0.4 per cent (s.a.) in both July and June and 11 per cent annualized in the past six months, partly due to counter tariffs. Grocery store prices have risen 3.4 per cent in the past year (n.s.a.), and a hefty 26 per cent from four years ago with notable spikes in coffee (58 per cent), pasta (42 per cent), and beef (41 per cent). But there are a few relative bargains, including, bananas (8 per cent), pork (9 per cent), and fish/seafood, potatoes, cheese, and ice cream (all in the 14-15-per-cent range). These items have at least risen less than employee average hourly wages (19 per cent) since July 2021, easing the pain at the checkout counter'
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