🇨🇦 Big 5 Banks wraps up fiscal year ‘22
With a meaningful allowance Increase.
In Q4 (ending Oct), the collective reserves are up 5.9% Q/Q, or $1.3 billion CAD.
The 3-year journey:
🟥 In 2020, 5 banks quickly raised the reserves by 70~% or $12.6 billion, in fear of the pandemic recession.
🟩 In the 6 quarters after, 70% of the reserves build-up or $8.9 billion was gradually released. The public and private relief programs steered clear of the worst scenario.
🟨 In Q3/Q4 F’22, after two increases, the total reserves are 28% or $5.1 billion more than the pre-pandemic level in Q1 F’20.
Behind the allowance increases:
🟦 Fast rate hike
BoC raised the rate by 50 bps on 12/07 - the 7th time in 2022.
The cumulative 400 bps increase this year put consumers and businesses with high debts to the test.
🟦 High inflation
Oct inflation down to 6.9% Y/Y vs. 8.1% in June.
It remains high. For consumers whose income cannot keep up, it means shrinking wallets.
🟦 Resilient job market
Sep # job vacancies remain high near 1 million.
A healthy job market helps cushion the downfall of layoffs, while sustaining the consumers’ demand.
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