UPDATE: Q4 Bank Results Continue Trend of Tightening
December 2022
LOAN GROWTH SLOWING, LOSS PROVISIONS RISING
Last week, the Big 6 Canadian provided their Q4/22 results which confirmed our previous speculation that the banks were tightening credit and preparing for tougher times ahead. We would advise borrowers who are in need of more flexible capital to quickly evaluate alternatives, which can be expedited with the advice of a qualified debt expert.
Quarterly Change in Big 6 Commercial Loans Outstanding
Loan growth is down to 1% Q-o-Q and will likely turn negative soon.
In addition, Credit Loan Loss Provisions continue to grow (47% Q/Q, 969% Y/Y) and provide a clear signal that the Big 6 are beginning to tighten lending operations in the post-COVID era.
Quarterly Change in Big 6 Loan Loss Provisions
Banks are putting capital aside for loan losses.
THE BIG 6 CONTINUE TO EXPAND, BUT CAUTIOUSLY
The Canadian Big 6 continue to extend loans, but have decelerated their new lending activity in Q4/22. While total commercial loans outstanding grew 18% Y/Y, new loan growth in Q4/22 was restricted to 1% Q/Q (vs. 3% historical average and 5% recently). Clearly, the Big 6 are tightening.
The Big 6: Total Loans Outstanding, Q1/2019 - Q4/2022
GROSS IMPAIRED LOANS REBOUND
Gross impaired loans are accelerating for the first time since COVID. On aggregate, gross impaired loans now account for 0.6% of all outstanding commercial loans (vs. 0.5% in Q3 2022) and have grown 24% Q/Q in Q4/22 (vs. -5% in 2022 Q3). This provides a signal that there may be tougher economic times ahead.
The Big 6: Gross Impaired Loans, Q1/2019 - Q4/2022
CREDIT LOAN LOSS PROVISIONS CONTINUE TO GROW
The Big 6 are beginning to stack ‘sandbags’ in anticipation of future losses, which continues to signal hard economic times may be ahead. Provisions are up 47% Q/Q and 969% Y/Y. Additionally, Provisions now account for 0.16% of all outstanding commercial loans, up from 0.11% in Q3/22 and negative 0.02% in Q4/21.
The Big 6: Credit Loan Loss Provisions, Q1/2019-Q4/2022
Sources: PayNet, Company Reports, Diamond Willow Advisory.
