How Exposed Are Canada’s Big Banks to the 3 Hardest-Hit Sectors of the Economy?

Retail, energy, and real estate are suffering. Canada’s big banks are not equally well positioned to withstand the fallout.

Piggy bank next to a financial report

Image source: Getty Images.

The COVID-19 crisis has ravaged the retail, energy, and real estate sectors. Canadians might be wondering how exposed the Big Five banks are to these sectors, given the Big Five’s importance to the Canadian economy. Below are the weightings of each sector in each bank’s business and government loan portfolio.

Retail 4% 3% 9% 12%
Energy 4% 2% 5% 5% 7%
Real Estate 27% 16% 20% 15% 14%

These are approximations, as each bank breaks out sectors slightly differently. In one case, retail was not listed as a sector. All percentages are derived from 2019 annual reports.

Toronto-Dominion Bank was the only bank to include a separate sector breakdown for its non-Canadian business and government loan portfolio in its 2019 annual report. TD’s global business and government loan portfolio totals approximately $252 billion. The retail, energy, and real estate sector exposure is almost identical in Canada and the U.S., collectively representing about $44 billion of loans in Canada and $43 billion in the United States.

TD’s largest client sector, globally, in its business and government loan portfolio is real estate, comprising about $69 billion of loans to real estate businesses in Canada and the United States.

Royal Bank of Canada has a business and government loan portfolio of $371 billion. Its largest client sector is government clients, who represent over $105 billion, or 28%, of the portfolio. RBC also has $61 billion in loans to real estate companies.

RBC’s annual report does not break out loans for the retail sector, but instead uses “consumer discretionary” and “consumer staples” sector categories. If we include both consumer discretionary and consumer staples as part of retail, RBC’s collective exposure to retail, energy, and real estate is almost $91 billion, or 24%, of its business and government loan portfolio.

CIBC possesses a global business and government loan portfolio worth over $182 billion. Its largest customer sector is governments, with almost $54 billion of loans, comprising over 29% of its business and government loan portfolio. Real estate companies are the third-biggest customer sector for CIBC, after financial institutions.

While CIBC is not overexposed to retail or energy, its business and government loan portfolio is more concentrated than its peers. CIBC has three sectors (financial institutions, real estate, and governments) that collectively account for just over $127 billion, or almost 70% of the entire business and government loan portfolio.

Bank of Montreal has a global business and government loan portfolio of approximately $251 billion. BMO’s largest client sector is “service industries,” representing about $46 billion in outstanding loans. Unfortunately, this sector description is not detailed enough to allow for thorough analysis. Some service sectors, like personal transportation, have been decimated in the current environment, while others, like food delivery, have held up well.

BMO has nine sectors that account for over $10 billion in client loans each. BMO is also one of the three banks, along with RBC and CIBC, whose largest client sector is not real estate.

Bank of Nova Scotia, also known as Scotiabank, has an approximately $227 billion global business and government loan portfolio. Its largest client sector is “real estate and construction,” with about $32 billion owed.

Among the Big Five, Scotiabank has the highest exposure to the energy sector, with almost $17 billion in energy industry loans. While Scotiabank is also listed as having the highest retail exposure, this is only because Scotiabank broke out results into “wholesale and retail,” whereas other banks, like BMO, broke out retail and wholesale separately. Scotiabank is second to BMO in collective retail and wholesale exposure.


TD, RBC, BMO, and Scotiabank are well diversified across sectors, and this is an advantage in the current environment. An obvious concern for the Big Five, and the Canadian economy as a whole, is the outsized reliance on the real estate sector. This is not news to Canadians.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends BANK OF NOVA SCOTIA. Fool contributor Kyle Walton has no position in the companies mentioned.

More on Bank Stocks

Retirees sip their morning coffee outside.
Dividend Stocks

TFSA: 2 Stocks To Earn Passive Income Even in a Recession

Investors are coping with 2023 recession fears differently. Some are investing in stocks that can create long-term passive income.

Read more »

Investor wonders if it's safe to buy stocks now
Bank Stocks

Is TD Stock a Buy Today?

TD stock is moving higher. Should you buy now?

Read more »

Bank sign on traditional europe building facade
Bank Stocks

3 Bank Stocks That Are Too Cheap to Ignore

These stocks appear attractive today and deserve to be on your radar.

Read more »

Bank Stocks

4 Things to Know About TD Stock in November 2022

Should you buy TD stock?

Read more »

Bank sign on traditional europe building facade
Bank Stocks

2 Bank Stocks to Load Up on in a Recession

Here are two top Canadian bank stocks investors may want to consider, particularly as we potentially head into a recession.

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Canadian Bank Stocks: Time to Buy the Underdogs

Consider buying National Bank of Canada (TSX:NA) stock and another banking underdog on the way down.

Read more »

think thought consider
Bank Stocks

Should You Invest in Scotiabank Right Now?

There are plenty of great discounted stocks to buy right now, like Bank of Nova Scotia (TSX:BNS). Here's why you…

Read more »

edit Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Bank Stocks

The CRA Just Increased Tax Breaks – Here’s How to Invest for More Savings

Savings from tax breaks can be leveraged to buy blue-chip TSX stocks such as the National Bank of Canada in…

Read more »