Investors Turn their Attention to Banks

Aug 23, 2021 By MarketDepth

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Investors are eagerly waiting for banks to report their financial results later this week. In fact, according to The Canadian Press, banks are largely expected to continue to unwind at least $16.5 billion across the Big Six, to cover widespread loan defaults that never materialized.

Looking at Loan Growth

However, investors will also keep an eye on impacts of the Delta variant and look for signs of loan growth, as the country continues its recovery from the COVID-19 pandemic. Loan growth may turn out to be an extremely important measure for banks, as many individuals and businesses had taken out loans during the pandemic to pay down debts, putting additional pressure on a key area for the financial sector.

Canadians Take on Larger Mortgage Debt

Though banks had initially benefited as both home sales and prices spiked, concerns about household debt have begun to grow. Earlier in May, the Bank of Canada had warned that many households have taken on large mortgages compared with their income, limiting their flexibility to deal with an unforeseen financial shock like the loss of a job. In fact, the debt levels also prompted Fitch Ratings Inc. to downgrade its rating on the operating environment for Canadian banks in July.