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Canadian banks are expected to bear bigger loss because of lower oil prices

Though, according to S&P Global Ratings, effects caused by sustained low oil prices appear manageable for the Canadian banks, they will probably continue loosing funds from energy loans as a result of oil prices drop in mid-2014.

27.Jun.16 10:56 PM
By Anastasia Sutulova


Canadian banks are expected to bear bigger loss because of lower oil prices
During the past two fiscal quarters, energy loan loss provisions for the Canada’s six largest banks have been 55% higher than last year. Though loss recognition from energy loans is in the early stages, it has all chances to continue growing.

Nevertheless, S&P Global Ratings believes that there is an even bigger problem for the country’s banks: signs that the oilpatch problems are beginning to percolate into the consumer portfolios in the oil-producing provinces of Alberta, Saskatchewan, and Newfoundland and Labrador. Although the likelihood is low, losses may also rise because of this.

However, Canada’s largest banks are known to have an adequate capital levels. This is why they are supposed to endure even a big consumer stress.

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