MENU

Consumer Lending Stats Lining Up Against the Canadian Banks

A recently released Royal Bank of Canada report added fuel to the fire that is slowly but surely enveloping the consumer lending departments of the Canadian banks.

The study indicated that Canadian consumers continue to temper their desire to borrow at historically high levels.  Several relevant stats from the piece include:

  • Household debt in February stood 4.5% higher than it did last February.  This compares to the 4.7% year over year growth that was experienced in the previous month and is down from the 6% year over year increase last January.  Growth exists, but is clearly slowing.
  • Residential mortgage debt increased 5.4% in February from one year ago to $1.16 trillion.  This is down from the 7.3% growth experienced in the last February to February period and is the slowest growth in mortgage accumulation since November 2001.  Growth exists, but is clearly slowing.
  • Consumer credit increased by 2.5% on a year-over-year basis in February, the slowest growth rate since July 1993.  Growth exists, but is clearly slowing.

Consumer lending over the past decade or so has been a huge tailwind for the Canadian banks.  With shares trading near their 52-week highs, as the table below illustrates, investors appear willing to believe that either this tailwind will continue or at worst, a replacement is waiting in the wings.  Consumer lending stats are increasingly making it look like a replacement is going to be needed.

Company

Current Price

52-week high

Difference

Bank of Montreal (TSX:BMO)

$64.30

$64.70

-1.0%

TD Bank (TSX:TD)

$84.18

$86.20

-2.3%

Royal Bank (TSX:RY)

$62.01

$64.92

-4.5%

Bank of Nova Scotia (TSX:BNS)

$59.04

$61.84

-4.5%

CIBC (TSX:CM)

$80.51

$84.99

-5.3%

Source:  Capital IQ

The S&P/TSX Composite Index is loaded with resource and financial stocks.  Because of this, investors that rely on Canadian Index funds or ETFs severely lack diversification in their portfolio, opening them to undue risks.  “Buy These 5 Companies Instead of Following a Flawed Piece of Advice” is our special FREE report that outlines an easy to implement strategy and 5 Canadian stocks that reduce the risks involved with passively investing in the Canadian market.  Click here now to receive the report – FREE!

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler does not own shares in any of the companies mentioned in this report at this time.  The Motley Fool has no positions in the stocks mentioned above.

Just Released!

Motley Fool CEO Tom Gardner Goes Live and Tells Hong Kong Investors To Buy This Canadian Darling Tech Stock…

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.