(The following statement was released by the rating agency)
NEW YORK, December 10 (Fitch) While an unsustainable housing market,
macroeconomic pressure from declining energy prices, and low interest rates will
challenge the Canadian baking sector in 2016, the sector rating outlook is
stable due to a sound profitability profile, according to a new Fitch Ratings
report.
'Canadian Banks are challenged by the record level of consumer indebtedness,
unemployment concerns from depressed energy prices, and the risk of
overvaluation in the housing market, which has so far been kept in check by
steady employment levels and low interest rates,' said Doriana Gamboa, Senior
Director at Fitch Ratings.
Despite the negative sector outlook, Fitch expects the credit profile of the
major Canadian banks to be stable due to consistent earnings performance, solid
balance sheets and supportive regulatory policy. However potential risks could
rise as the banks expand geographically and into wealth management and capital
markets businesses.
Fitch views the booming housing market in Canada as unsustainable and a looming
price correction will pose a risk to banks, particularly if unemployment
increases due to low energy prices. Fitch sees these risks as manageable,
however, since banks' underwriting models soften the impact of a home price
correction and the Canada Mortgage and Housing Corporation (CMCH) insures a
large portion of the mortgages on banks' balance sheets.
Due to the sluggish economy and low interest rate environment, Canadian bank
profit will be slow and modest in 2016. Banks will likely report higher credit
losses, continued margin pressure and only modest loan growth in the next year.
The full report '2016 Outlook: Canadian Banks' is available at
'www.fitchratings.com.'
Contact:
Doriana Gamboa
Senior Director
+1-212-908-0865
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
Justin Fuller, CFA
Senior Director
+1-312-269-2057
Christopher Wolfe
Managing Director
+1-212-908-0771
Media Relations: Hannah Huntly, London, Tel: +44 203 530 1777, Email:
hannah.huntly@fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
2016 Outlook: Canadian Banks
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874927
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