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Canada's big banks field half a million mortgage deferral requests

Published 2020-04-03, 07:30 a/m
Updated 2020-04-03, 11:18 a/m
© Reuters. FILE PHOTO: Buildings are seen in the financial district in Toronto

© Reuters. FILE PHOTO: Buildings are seen in the financial district in Toronto

(Reuters) - Canada's biggest banks have received nearly half a million requests from homeowners to hold off mortgage payments as the economic fallout from the COVID-19 pandemic deepens, according to the Canadian Bankers' Association.

Since the banks announced a plan to provide financial relief over two weeks ago, almost 500,000 requests to skip or defer mortgage payments have been completed or are being processed, up from 213,000 on March 26, according to a statement https://cba.ca/mortgage-deferrals-in-canada-reach-half-a-million from the association.

The delay in mortgage payments comes at a time when Canadian banks are seeing subdued earnings growth due to lower margins, increasing loan loss provisions and volatile performance in their capital markets divisions.

The "big six" lenders - Royal Bank of Canada (TO:RY), TD Bank (TO:TD), Scotiabank (TO:BNS), Bank of Montreal (TO:BMO), CIBC (TO:CM) and National Bank of Canada (TO:NA) - announced the coordinated effort on March 17 to offer mortgage relief to customers suffering pay disruption as businesses grind to a halt.

While homeowners can ask for up to a six-month deferral, it could cost them additional interest.

"The country's six largest banks have deferred more than 10% of the mortgages in their portfolio," the statement said.

Cash freed up for Canadians from deferrals completed so far is about $663 million per month, or nearly $2 billion per quarter, and this number will increase over the coming weeks, the association said.

A surge in deferrals usually points to a short-term liquidity crunch for lenders, but bigger banks are better-positioned to weather such a spike.

To meet demand for deferrals and loans, Canada's biggest banks can access government liquidity support, including security purchases and also draw down from capital buffers.

© Reuters. FILE PHOTO: Buildings are seen in the financial district in Toronto

On Thursday, Toronto-Dominion Bank (TO:TD) Chief Executive Officer Bharat Masrani said the bank has approved 60,000 or "virtually all" the requests for mortgage deferrals received so far as part of efforts to ease the impact of the COVID-19 outbreak on borrowers.

Latest comments

now if everyone started to take their money out to buy physical gold, the banks could start to panic.
Not that I'm too worried about the big banks, but I wonder what percentage of their portfolio they can afford to defer and for how long before they run out of money?
banks will get a big chunk of federal funds
lmao. it's only deferral and interests are still adding up.
Banks can have total earnings decline 40% and be at a 90% payout ratio on dividends.
mind you hydrocloroquine, zmap and zinc have 100 percent efficacy rate at stopping covid19
I hope this is sarcasm...
I can show you studies say the earth is flat....oh ...what? you say you've already read those studies...? why am I not surprised?
that's why you want to find objective evidence from academically competent figures
the moral hazard...
Crazy
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