Thursday, December 1, 2011

Royal Bank of Canada and Bank of Nova Scotia Most Exposed to Consumer Debt

Safe as Canadian banks, eh?

Concern over Canadian bank exposure to overleveraged consumers
According to David Beattie, Moody’s analyst and author of the report, the Royal Bank of Canada is the most susceptible with 24% of its total managed assets made up of uninsured loans. Next is Bank of Nova Scotia at 21%, CIBC at 20%, Toronto-Dominion Bank and National Bank of Canada both at 18%, with Bank of Montreal the most protected at 14%.

“Canadian household debt as a share of personal disposable income stood at a record 150.8% at the end of June this year.” said Mr. Beattie. “We are concerned that, while taking advantage of low interest rates, consumers are also taking on debt the may not be able to service when rates inevitably go up.”
Canadian Bank exposure from the Financial Post article
Canadian Personal Debt overlaid with U.S. Personal debt (orange line).
Financial Post chart has been overlaid with the U.S. chart from here. Both are charted as a percent of disposable income, although the U.S. is Gross and the Canadian one is marked Personal (which isn't clear if that's post or pre personal tax) so use the chart only as a trend. The blue field in the background chart is U.S. consumer debt relative to GDP.

As you can see the Canadian consumer has continued to rack up additional debt while south of their border, the U.S. consumer has been trying to repair their personal balance sheet.

Hat tip: Kevin commenting at

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