Bank CEOs maintain positive credit outlook despite Canada-U.S. trade war escalations

TORONTO — Canadian bank CEOs say their credit outlooks are still generally positive despite Canada-U.S. trade tensions ratcheting up, though they’re taking some precautions. “I’m a little cautious because of the escalation of the trade war right now, but what we’re seeing outside of that, consumer, commercial, U.S.

commercial is getting better,” RBC president and CEO Dave McKay said on Wednesday at the Scotiabank Financials Summit in Toronto. However, he says tariff-impacted sectors are facing a significant degree of uncertainty and the bank is maintaining a robust capital buffer to absorb potential losses. Scotiabank president and CEO Scott Thomson says he doesn’t think tariffs will have a large effect on the lender’s credit performance.

“A relatively small amount of trade is tariffed, and so I don’t think that’s going to have a huge impact on the credit performance, but obviously we’ll have to stay tuned for what transpires over the next year or so from a macro perspective and the relationship with the U.S. He said that the bank’s commercial, small business and automotive segments don’t appear to have any significant issues so far. TD chief executive Raymond Chun said he is seeing resiliency in both Canada and the U.S.

Though, he said the bank has also set aside $500 million of reserves for tariff-related uncertainties. The trade war entered a new chapter on Tuesday as the Canadian government introduced retaliatory tariff measures in response to U.S. In response to Canada’s retaliatory tariffs, U.S.

President Donald Trump signed new executive orders to completely bar imports of certain Canadian goods. imposed its initial round of duties, Canada’s major banks reported third-quarter earnings that were largely positive, with the lenders pointing to a resilient economy while saying the trade tensions were manageable. The banks are also navigating a recent change to the country’s domestic stability buffer, which was announced by the federal banking regulator in June.

OSFI lowered the domestic stability buffer to three per cent from 3.5 per cent, saying the change would give the country’s six largest banks greater flexibility to deploy capital. The buffer is part of the amount of money Canada’s big banks must keep on hand in case of economic shock.