Moody's to cut Cana­dian banks

The Pak Banker - - Front Page -

TORONTO

Global rat­ing agency Moody's has placed the longterm rat­ings of six Cana­dian banks (in­clud­ing the bank fi­nan­cial strength rat­ings, all se­nior debt, ju­nior sub­or­di­nated debt, and pre­ferred stock rat­ings) on re­view for down­grade.

The short term Prime-1 rat­ings of the six banks are af­firmed. Un­der­pin­ning this re­view is Moody's view that these firms face chal­lenges not fully cap­tured in their cur­rent rat­ings. Moody's spe­cial com­ment "Con­cerns about high con­sumer debt lev­els and el­e­vated hous­ing prices, macro-eco­nomic risks, cap­i­tal mar­kets ac­tiv­i­ties and bank-spe­cific fac­tors drive rat­ing re­view of Cana­dian banks" pro­vides ad­di­tional com­men­tary on the ra­tio­nale be­hind to­day's rat­ing ac­tions.

The banks placed on re­view to­day in­clude Bank of Montreal (BMO; Aa2 re­view for down­grade; B-/a1 re­view for down­grade). Bank of Nova Sco­tia (BNS; Aa1 re­view for down­grade; B /aa3 re­view for down­grade). Caisse Cen­trale Des­jardins (CCD; Aa1 re­view for down­grade; C+/a2 re­view for down­grade). Cana­dian Im­pe­rial Bank of Com­merce (CIBC; Aa2 re­view for down­grade; B-/a1 re­view for down­grade). Na­tional Bank of Canada (NBC; Aa2 re­view for down­grade; B-/a1 re­view for down­grade)."To­day's re­view of the Cana­dian banks re­flects our con­cerns about high con­sumer debt lev­els and el­e­vated hous­ing prices which leave Cana­dian banks more vul­ner­a­ble to in­creased risks to the Cana­dian econ­omy, and for some banks a size­able ex­po­sure to volatile cap­i­tal mar­kets busi­nesses is of con­cern," said David Beat­tie, a Moody's Vice Pres­i­dent. "Moody's rec­og­nizes the strong do­mes­tic fran­chises and solid earn­ings ca­pac­ity of these large Cana­dian banks, and they will continue to rank among the high­est-rated banks glob­ally fol­low­ing this re­view." High lev­els of con­sumer in­debt­ed­ness and el­e­vated hous­ing prices leave Cana­dian banks more vul­ner­a­ble to down­side risks to the Cana­dian econ­omy than in the past. By the sec­ond quar­ter of 2012, Cana­dian house­hold debt to per­sonal dis­pos­able in­come reached a record 163%, up from 137% in the sec­ond quar­ter of 2007, re­flect­ing growth in debt that sig­nif­i­cantly out­paced per­sonal in­comes.

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