Latest news with #creditlosses
Globe and Mail
2 days ago
- Business
- Globe and Mail
What is Bay Street signalling about the economy?
Canada's Big Six banks have all released their second-quarter earnings, and the results point to mounting concern about a potential economic downturn. The combined provisions for credit losses (PCL) – as a percentage of total loans – have reached their highest level since the first quarter of 2010, excluding the temporary spikes seen during the height of the pandemic in the second and third quarters of 2020. It's worth noting that the presented data prior to 2014 included only the Big Five banks, not National Bank NA-T. Now, with all six major lenders accounted for, the data paint a clear picture: Canadian banks are preparing for a deteriorating credit environment, as economic headwinds threaten borrowers' ability to meet their loan obligations. While most earnings metrics reflect past performance – specifically the quarter ended April 30, 2025 – the provision for credit losses is forward-looking. It represents the funds banks set aside during the quarter to guard against potential defaults in the near future. Banks manage credit risk through a reserve called the allowance for credit losses (ACL), a buffer designed to absorb losses from unpaid loans. This reserve decreases when loans are written off and increases when new provisions are added or previously written-off loans are recovered. In the second quarter of 2025, net write-offs – or realized credit losses – climbed 8.3 per cent year-over-year, to $3.7-billion. The total ACL rose to $36.6-billion, up 16.7 per cent from the same period last year. Most strikingly, total PCL jumped to $6.4-billion, a 46.2-per-cent annual increase and up 21 per cent from the previous quarter. The ACL has now reached 0.86 per cent of total loans, surpassing the 17.5-year average of 0.74 per cent and marking its highest level in the past 14 years, excluding the period from the second quarter of 2020 to the second quarter of 2021. However, the sharp rise in PCL is the clearest indication yet of banks' growing concern about Canadians' ability to repay their debts. As shown in the chart, PCL at 0.15 per cent of total loans is at its highest level in the past 15 years, excluding the two quarters during the peak of the pandemic in 2020. Even accounting for the more forward-looking and conservative IFRS 9 standards, which replaced IAS 39 in 2018, the second-quarter results would still likely represent the highest levels in at least 14 years – even under the previous accounting framework. PCL also stands well above its 17.5-year average of 0.09 per cent. This uptick may be an early indicator of growing financial stress among Canadian households and businesses. In short, Bay Street is bracing for economic turbulence. The outlook is clouded by persistent trade tensions with the United States, stagnant productivity and sluggish GDP growth, factors that are prompting cautious forecasts for the Canadian job market. However, the current trajectory does not yet mirror the severity of the global financial crisis, when, from the fourth quarter of 2008 through the first quarter of 2010, the total PCL of the big banks remained higher than current levels. Hanif Bayat, PhD, is the CEO and founder of a Canadian personal finance platform.
CTV News
27-05-2025
- Business
- CTV News
Scotiabank reports Q2 profit down from year ago, provision for credit losses up
A Scotiabank sign is shown on a shopping mall in Ottawa on Thursday, June 27, 2024. THE CANADIAN PRESS/Sean Kilpatrick TORONTO — The Bank of Nova Scotia reported second-quarter net income of $2.03 billion, down from $2.09 billion a year earlier as it put aside more money for bad loans. The bank also raised its quarterly dividend to $1.10 per share, up from $1.06 per share. The increased payment to shareholders came as Scotiabank says its profit amounted to $1.48 per diluted share for the quarter ended April 30 compared with a profit of $1.57 per diluted share in the same quarter last year. Revenue totalled $9.08 billion, up from $8.35 billion., while the bank's provision for credit losses for the quarter amounted to $1.40 billion, up from $1.01 billion a year ago. On an adjusted basis, Scotiabank says it earned $1.52 per diluted share, down from an adjusted profit of $1.58 per diluted share a year earlier. Analysts on average had expected an adjusted profit of $1.56 per share, according to data provided by LSEG Data & Analytics. This report by The Canadian Press was first published May 27, 2025.
Bloomberg
22-05-2025
- Business
- Bloomberg
TD Beats Estimates on Lower-Than-Expected Loan Loss Provisions
Toronto-Dominion Bank beat estimates after setting aside less money than expected for souring loans, despite concerns that US tariffs will hamper economic growth. Canada's second-largest lender earned C$1.97 per share on an adjusted basis in its fiscal second quarter, it said in a statement Thursday, topping the C$1.78 average analyst estimate. Provisions for credit losses totaled C$1.34 billion ($966 billion) for the three months through April, less than the C$1.41 billion analysts had forecast.
CTV News
22-05-2025
- Business
- CTV News
TD Bank profit falls on hit from higher bad loan provisions, economic uncertainty
TD Bank signage is pictured in the financial district in Toronto on Sept. 8, 2023. (Andrew Lahodynskyj / The Canadian Press) TD Bank reported a fall in second-quarter profit on Thursday, as the Canadian lender stockpiled money to cover for potential bad loans in an uncertain economic environment. The results from the country's second-biggest bank offer a glimpse into the impact of the tariff chaos on the Canadian economy. Trade uncertainty is expected to result in higher credit losses and weaker loan growth as sentiment takes a hit from the changing outlook. In the second quarter, TD's provision for credit losses jumped to $1.34 billion from $1.07 billion a year earlier. 'TD delivered strong results this quarter, with robust trading and fee income in our markets-driven businesses as well as deposit and loan growth in Canadian Personal and Commercial Banking,' CEO Raymond Chun said in a statement. Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Shailesh Kuber, Reuters
Yahoo
22-05-2025
- Business
- Yahoo
Buy now, pay later pitfalls: Many consumers aren't paying loans
Klarna, a significant player in the buy now, pay later (BNPL) space, has faced losses in recent months as consumers failed to make payments on their loans. While Klarna's user base continued to grow in the first quarter, its losses more than doubled compared with a year earlier, the company said in its Monday earnings report. Its credit losses, when a borrower defaults on a loan, reached 17%. Consumers have continually leaned on companies such as Klarna, Affirm and Afterpay to give them more financial flexibility in the face of persisting inflation, high interest rates and student loan payments, which resumed in October 2023 after a pause due to the COVID-19 pandemic. Costco Rolls Out Buy Now, Pay Later For Big Online Purchases Through Affirm Consumers leverage the platforms because they allow for the option to pay in four interest-free installments every two weeks or, if approved, can make monthly payments over the course of six to 18 months, with interest (Afterpay only allows the four-installment plan). But experts have long warned though that these services can easily be a ticket to overspending. With Klarna, shoppers are able to split their purchase into multiple installments instead of paying the full amount upfront. Klarna fronts all the money upfront to the retailer and then takes money from a consumer-linked payment over an extended period of time. Read On The Fox Business App Risks Of Buy Now, Pay Later: 'Ticket To Overspending,' Expert Says If consumers don't have the money to pay, they get hit with a late fee. Another concern among experts is that getting approved for these services is also extraordinarily easy. For instance, just because someone is approved to use these loans doesn't guarantee that they have the financial means to pay them back, according to LendingTree's chief consumer finance analyst Matt Schulz. But these issues aren't unique to Klarna. More than 40% of users of BNPL loans say they paid late on one of them in the past year, up from 34% just a year ago, according to a LendingTree survey. According to LendingTree's BNPL Tracker, 39% of Americans were at least considering applying for a buy now, pay later loan in April, up eight points from March. This marked the biggest monthly jump since an eight-point increase in March 2023. Households haven't been in great shape as Americans' debt levels, including credit card debt, rose to new all-time highs in the fourth quarter of 2024, according to a report by the Federal Reserve Bank of New York in February. The report showed that overall household debt increased by $93 billion to $18.04 trillion at the end of 2024, an all-time high. Credit card balances rose by $45 billion from the prior quarter to reach $1.21 trillion at the end of December, which is also a record high. FOX Business' Eric Revell contributed to this report. Original article source: Buy now, pay later pitfalls: Many consumers aren't paying loans Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
