Banks’ loan portfolios now experiencing slower growth

Banks’ loan portfolios now experiencing slower growth

Banks’ loan portfolios now experiencing slower growth A trend of slower Canadian mortgage growth has made itself apparent as the country’s largest banks released their Q2 2017 results.

Royal Bank of Canada—which currently holds the largest proportion of domestic mortgages—announced that it has experienced its slowest annual growth since Q1 2015. Average home loan balances increased by 5.5 per cent year-over-year in the second quarter of this year, up to $224.1 billion.

“New listings were up 34 per cent from the prior year, which suggests some potential easing of the supply-demand constraints that contributed to rising home prices,” CEO David McKay said during a call with analysts, as quoted by Bloomberg. “We believe the housing market will continue to be supported by steady population growth, which is partially driven by immigration, household income gains and low interest rates.”

On the other hand, Toronto-Dominion Bank—which is Canada’s largest lender by assets—said that domestic residential mortgage balances dropped by 0.4 per cent from the prior quarter, down to $187.5 billion. This represented the first decline in two years. Year-over-year, home balances increased by 1.2 per cent, the most sluggish annual growth rate in at least four years.

“In the last two weeks of April or so, we did begin to see some cooling in the housing market as sales activity slowed and more supply came to the market,” CFO Riaz Ahmed said. “We are happy with that because that’s generally good for Canada and our customers.”

Meanwhile, Bank of Montreal’s domestic mortgage book fell by 0.1 per cent quarter-over-quarter, to $98.3 billion. As with TD’s case, this was the first contraction in two years. On an annual basis, home loan balances spiked up by 5.2 per cent, the slowest in three quarters.

“There is a little bit of seasonality in the second quarter,” CFO Thomas Flynn stated. “It’s not as active of a mortgage season for us, and it’s also a slightly shorter quarter.”

In contrast, Canadian Imperial Bank of Commerce saw its mortgage balances go up by 12 per cent year-over-year, although the same metric declined by 2.3 per cent from the previous quarter.


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