Canadian Banks: Credit risk playbook for a recession
Report by Veritas Investment Research
The coming credit storm - Nigel D'Souza expects provisions for credit losses in the upcoming cycle to match or potentially exceed PCLs during the GFC. Highlights from Nigel’s report include: 1) Household debt service ratio to set a record high. 2) International exposure to skew PCLs higher during a recession. 3) Real estate secured lending portfolios unlikely to drive material credit losses. 4) Wholesale portfolio credit risk likely to be more idiosyncratic than systemic. 5) Of the Big Six banks, Bank of Montreal would experience the highest peak PCL ratio during a recession (1.20% or 6.0x BMO's pre-pandemic level); National Bank the lowest (0.29%).