Canada's Consumer Leverage Growth Is Not Going To End Well
Sober Look | Sep 02, 2012 04:16AM ET
Canada continues to face rising consumer debt levels. Since the post on Canadian housing risks (Bloomberg/BW : Royal Bank of Canada, Toronto- Dominion Bank and Canadian Imperial Bank of Commerce raised their dividends after reporting third-quarter profits that beat analysts’ estimates on consumer lending.
Royal Bank, the country’s biggest lender, said profit for the period ended July 31 rose 73 percent to a record C$2.24 billion ($2.26 billion). Toronto-Dominion, the second-biggest bank, said net income climbed 14 percent to CAD 1.7 billion, or CAD 1.78 a share, while CIBC said profit rose 42 percent to CAD 841 million, or CAD 2 a share.
The three Toronto-based lenders join Bank of Montreal (BMO) and Bank of Nova Scotia (BNS) in raising dividends this week as gains in consumer lending and higher trading revenue helped the world’s soundest banks report earnings that topped estimates.
All this is happening at the time when the global slowdown and declining demand for resources (which is Canada's strength) are threatening to dampen Canada's economic growth. The combination of rising consumer leverage and easy profits in the banking system (remember the good old days in the US?) have the makings of a potentially nasty economic downturn for Canada.
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