Friday, July 27, 2012

Late to the party...

S and P has done it- they downgraded Canadian Banks based on consumer indebtedness and exposure to the housing bubble (my words)


This is exactly what us chicken little bears have been saying for several years. THIS WILL NOT END WELL. Over-priced housing puts the whole system in peril. Banks,  Provincial, Local and National Governments.


The myth of the rock solid Canadian financial sector and our economic miracle has been exposed to be: the luck of being resource rich and pumping housing by drawing in future demand, dropping rates to zero, transferring the risk to the tax-payer and lax lending. The result.. well we are about to experience that and it gives me no pleasure to say that many of us saw this coming.


S&P: Outlook Negative on BNS, LB, NA, RY & TD

July 27th, 2012
Standard & Poor’s announced:
it has revised its outlooks on seven Canadian financial institution ratings to negative from stable. The financial institutions are:
  • The Bank of Nova Scotia
  • Central 1 Credit Union
  • Home Capital Group Inc.
  • Laurentian Bank of Canada
  • National Bank of Canada
  • Royal Bank of Canada
  • Toronto-Dominion Bank
At the same time, Standard & Poor’s affirmed its ratings on all seven banks.

The outlook revisions are linked to our evolving views of economic risk and industry risk for banks operating in Canada. A prolonged run-up in housing prices and consumer indebtedness in Canada is in our view contributing to growing imbalances and Canada’s vulnerability to the generally weak global economy, applying negative pressure on economic risk for banks. Growing pressure on banks’ risk appetites and profitability arising from competition for loan and deposit market share could also lead to a deterioration in our view of industry risk.

The negative outlook recognizes the potential for deterioration of Canadian banks’ financial performance and capitalization generally, associated with consumer debt burdens proving excessive in an unfavorable economic scenario, or due to competitive pressures amplified by the shift to a consumer deleveraging phase.
Over the past decade, Canadian consumer credit market debt (including residential mortgage loans and consumer credit) has risen to more than 150% from 110% of disposable income, and relative to GDP, consumer debt has increased to more than 90% from about 70%. Over the same period, Canadian house prices have approximately doubled, with compounded real growth in housing prices estimated to be about 5% per year.

Bank risk profiles have benefited from Canadian banks’ underwriting practices, stable performance metrics for banks’ credit portfolios, and the sharing of mortgage risk between the banks, the borrowers (extensively based on full recourse to the consumer), and the providers of mortgage insurance, notably the Canada Mortgage and Housing Corporation (AAA/Stable/A-1+). In our view, Canadian banks’ risk tolerances and risk management capabilities are generally strong and attuned to risks inherent in the Canadian consumer and housing sectors. Even so, we believe there is currently growing potential for deterioration of Canadian bank credit profiles associated with scenarios incorporating consumer sector stress.

Systemic factors are incorporated in Standard & Poor’s rating methodology primarily through its Banking Industry Country Risk Assessment, or BICRA. The BICRA framework takes into account economic and institutional risk factors present in the environment in which banks operate. Canada’s BICRA is currently set at ‘1′ (lowest risk) on a 1 to 10 scale. The BICRA component of the analysis is intended to highlight emergent systemic risks that may not be fully apparent when viewing the sector at the level of individual banks

43 comments:

  1. Hat tip - preferred blog: http://www.prefblog.com/?p=19339

    ReplyDelete
  2. It'll be more costly for Fed and our banks to borrow money now.
    Oh wait, I thought the overnight rate is going down another .50 basis points this year!

    Thanks fishyRE for the timely post.

    ReplyDelete
  3. Fishy, Globe & Mail changed the wordings from "downgraded" to "cuts outlook".

    ReplyDelete
  4. Being resource rich only helped because China went completely crazy in 2009.

    ReplyDelete
  5. no-housing-bubbleJuly 28, 2012 at 11:58 PM

    OTTAWA — Canada's schools must stop charging foreign students higher tuition fees than Canadians pay
    http://tinyurl.com/bp9wmlp

    Ahh .. of course!
    http://www.greaterfool.ca/2012/03/09/the-harbinger/

    ReplyDelete
  6. We have shoeboxes, lane houses and now, ladies & gentlemen, welcome to the THIN STREETS" of Vancouver.

    ReplyDelete
    Replies
    1. oops! forgot the link

      http://www.rethinkhousing.ca/view_submission.php?ID=23

      Delete
  7. I blog quite often and I truly thank you for your information.
    The article has truly peaked my interest. I'm going to take a note of your website and keep checking for new details about once a week. I opted in for your Feed as well.
    my web site: order

    ReplyDelete
  8. Write more, thats all I have to say. Literally, it seems as
    though you relied on the video to make your point.
    You definitely know what youre talking about, why throw away your intelligence on just posting
    videos to your weblog when you could be giving us something enlightening to read?
    Feel free to surf my weblog loss weight Program

    ReplyDelete
  9. Thanks for your personal marvelous posting! I definitely enjoyed reading it,
    you are a great author. I will make sure to bookmark your blog and will often come back sometime soon.

    I want to encourage you to continue your great writing, have a
    nice evening!
    Feel free to surf my website : clickbacnk

    ReplyDelete
  10. I seriously love your site.. Pleasant colors & theme. Did you develop this website yourself?

    Please reply back as I'm wanting to create my very own blog and want to find out where you got this from or exactly what the theme is named. Thank you!
    Also visit my webpage ... Schufa frei Kredit

    ReplyDelete
  11. I am sure this post has touched all the internet viewers,
    its really really pleasant paragraph on building up new
    webpage.

    Also visit my homepage; private studentenversicherung
    Feel free to surf my web site :

    ReplyDelete
  12. Woah! I'm really enjoying the template/theme of this website. It's simple, yet effective.
    A lot of times it's tough to get that "perfect balance" between usability and visual appeal. I must say you've done a very good job with
    this. Additionally, the blog loads very quick for me on
    Chrome. Superb Blog!
    My page ... new business trends 2012

    ReplyDelete
  13. Thanks for finally talking about > "Late to the party..." < Loved it!
    Visit my weblog ... Working online From home

    ReplyDelete
  14. Thanks to my father who informed me about this webpage, this web site is actually remarkable.
    Feel free to visit my site :: search engine optimization company toronto

    ReplyDelete
  15. I feel this is one of the most vital info for me. And i'm glad studying your article. However wanna commentary on some general issues, The web site style is perfect, the articles is in point of fact great : D. Excellent activity, cheers

    Here is my web site: Consolidating Student Loans 2012
    Visit my page Beitrag Krankenkassen

    ReplyDelete
  16. Hmm it appears like your website ate my first comment (it
    was extremely long) so I guess I'll just sum it up what I wrote and say, I'm thoroughly enjoying your
    blog. I as well am an aspiring blog blogger but I'm still new to the whole thing. Do you have any tips and hints for first-time blog writers? I'd genuinely appreciate it.
    Here is my webpage ; top 10 reseller hosting

    ReplyDelete
  17. I read this article completely concerning the resemblance of hottest and earlier technologies, it's awesome article.

    Here is my homepage sofort kredit trotz schufa

    ReplyDelete
  18. Please let me know if you're looking for a article author for your site. You have some really great posts and I believe I would be a good asset. If you ever want to take some of the load off, I'd love
    to write some content for your blog in exchange for a link back
    to mine. Please blast me an email if interested.

    Many thanks!

    my web-site: clickbank marketplace encuestas

    ReplyDelete
  19. Hello to all, as I am actually keen of reading this website's post to be updated regularly. It contains good information.

    Also visit my web site :: consolidating private student loans

    ReplyDelete
  20. I like it when individuals get together and share views.
    Great website, continue the good work!

    Check out my site; krankenversicherung mitglieder

    ReplyDelete
  21. Why users still use to read news papers when in this technological world all is presented on web?


    Feel free to visit my site ... stay at home income
    My website :: Mom At Home Jobs

    ReplyDelete
  22. It's not my first time to go to see this web page, i am visiting this site dailly and get nice information from here every day.

    Have a look at my webpage Suggested Resource site

    ReplyDelete
  23. Hmm it seems like your blog ate my first comment (it was extremely long) so I guess I'll just sum it up what I wrote and say, I'm thoroughly enjoying your blog.
    I too am an aspiring blog writer but I'm still new to everything. Do you have any points for novice blog writers? I'd really appreciate it.


    Feel free to surf to my web-site; bad credit refinancing mortgage

    ReplyDelete
  24. This design is incredible! You certainly know how to keep a reader
    entertained. Between your wit and your videos, I was almost moved to start my own blog (well,
    almost...HaHa!) Fantastic job. I really loved what you had to say, and more than
    that, how you presented it. Too cool!

    Feel free to surf to my homepage - gesetzliche krankenversicherung vergleich leistungen

    ReplyDelete
  25. I like it when individuals come together and
    share thoughts. Great site, stick with it!

    Check out my page :: make money as affiliate

    ReplyDelete
  26. If some one wishes to be updated with most up-to-date technologies after that he must be visit
    this website and be up to date every day.

    Feel free to surf to my weblog ... multi website hosting
    Also see my web site: Hosting Cheap

    ReplyDelete
  27. My brother suggested I might like this web site.
    He was totally right. This post actually made my day. You cann't consider just how so much time I had spent for this information! Thank you!

    Feel free to visit my web blog :: wo bekomme ich einen kredit trotz schufa eintrag

    ReplyDelete
  28. Saved as a favorite, I like your web site!

    My blog post; affiliate internet marketing

    ReplyDelete
  29. Hmm is anyone else having problems with the pictures on this blog loading?
    I'm trying to determine if its a problem on my end or if it's the blog.
    Any suggestions would be greatly appreciated.

    Feel free to visit my blog - best Home Equity loan rates
    My page :: online home loans for bad credit

    ReplyDelete
  30. I think this is one of the most important info
    for me. And i am glad reading your article.
    But should remark on some general things,
    The site style is ideal, the articles is really excellent :
    D. Good job, cheers

    Take a look at my weblog: tropical island vacations

    ReplyDelete
  31. Heya are using Wordpress for your site platform? I'm new to the blog world but I'm trying
    to get started and set up my own. Do you need any html coding knowledge to make your own blog?
    Any help would be really appreciated!

    Visit my web blog: hosting Business
    my web site :: en iyi reseller hosting

    ReplyDelete
  32. I constantly spent my half an hour to read this web site's articles or reviews everyday along with a mug of coffee.

    My blog post :: Business opportunity uk

    ReplyDelete
  33. Hi, I read your blog daily. Your humoristic style is awesome, keep up the good work!



    Here is my site how to use clickbank to make money

    ReplyDelete
  34. Wow, fantastic weblog structure! How lengthy have you been blogging for?
    you make running a blog glance easy. The overall glance of your website is fantastic, as smartly as the content!


    Feel free to surf to my blog ... professional web hosting

    ReplyDelete
  35. My family always say that I am killing my time here at net,
    except I know I am getting experience everyday by reading thes fastidious articles or
    reviews.

    Here is my web site :: fha loans

    ReplyDelete
  36. I'm not sure where you are getting your information, but good topic. I needs to spend some time learning much more or understanding more. Thanks for wonderful information I was looking for this information for my mission.

    Check out my web site; die besten mode online shops

    ReplyDelete
  37. You really make it appear really easy along with your presentation but I find this topic to be really one thing which I feel I'd never understand. It seems too complicated and very wide for me. I'm looking forward for your subsequent
    publish, I will attempt to get the hold of it!

    Check out my webpage ... Best Seo Company India

    ReplyDelete
  38. You really make it appear really easy along with your presentation but I find
    this topic to be really one thing which I feel I'd never understand. It seems too complicated and very wide for me. I'm looking forward for your subsequent publish, I
    will attempt to get the hold of it!

    Here is my site - Best Seo Company India

    ReplyDelete
  39. Thankfulness to my father who stated to me about this website, this
    weblog is really amazing.

    Also visit my site :: Go Here

    ReplyDelete
  40. I wanted to thank you for this wonderful read!
    ! I absolutely enjoyed every little bit of it. I've got you saved as a favorite to look at new stuff you post…

    my weblog; tips buying perfume

    ReplyDelete
  41. If all players are wrong the murderer gets away and everyone loses.
    A murder mystery game is a fun way to pass the time during the twenties theme party.
    Every Halloween party that people remember later in the year by
    saying things like "Do you remember so-and-so's Halloween party last year.

    Also visit my website: international Development

    ReplyDelete
  42. Havе you еver considеred creating
    an ebooκ or guеst authorіng on other
    blogs? I have a blog bаsed on the samе informatiοn you ԁiscusѕ anԁ wοuld really like to
    haνe you ѕhare somе stοгіes/infoгmatіοn.
    I know my vіewеrѕ would enјoy youг work.
    If уou're even remotely interested, feel free to shoot me an e mail.

    Here is my website :: long term loans

    ReplyDelete