7 Canadian banks get negative outlook

Standard and Poor’s have downgraded their outlook for 7 Canadian banks from stable to negative.

And what has motivated this downgrade?

High housing prices and consumer debt.

Now you can bet that S&P are aware of the CMHC and the backdoor bank bailout, but when things get this out of balance there is a spill-over effect.  If you can’t pay the mortgage you probably aren’t paying the credit card bill either, and there’s no CMHC buying up credit card debt.

“A prolonged run-up in housing prices and consumer indebtedness in Canada is in our view contributing to growing imbalances and Canada’s vulnerability to the generally weak global economy, applying negative pressure on economic risk for banks,” the rating agency stated in its decision. “Growing pressure on banks’ risk appetites and profitability arising from competition for loan and deposit market share could also lead to a deterioration in our view of industry risk.”

The seven Canadian banks with a negative outlook are:

-Bank of Nova Scotia
-Central 1 Credit Union
-Home Capital Group Inc.
-Laurentian Bank of Canada
-National Bank of Canada
-Royal Bank of Canada
-Toronto-Dominion Bank

Full article in the Globe and Mail.

 

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rp1
Guest
rp1

“…and there’s no CMHC buying up credit card debt.”

Anymore. The CMHC was insuring HELOCs, which everyone used to consolidate debt at super low rates. The government subsidized consumer debt by providing cheap insurance.

HipsterBear
Guest
HipsterBear

I heard the term “flow insurance”. Anyone know what it is? It sounds current.

registered
Member
registered

Will it make this guy finally STFU?

http://news.nationalpost.com/2012/06/11/harper-tells-europe-it-should-look-to-canada-for-practical-economic-management/

I cringe at the thought that he’ll probably take to the international stage blaming Europe when his fiscal house of cards collapses.

joe_blown_away_by_high_housing_costs
Guest
joe_blown_away_by_high_housing_costs

The dangers of home renovations: There could be explosives hidden in the walls.

joe_blown_away_by_high_housing_costs
Guest
joe_blown_away_by_high_housing_costs

The dangers of home renovations: There could be explosives hidden in the walls.

http://www.vancouversun.com/Century+explosives+hidden+Main+Street+house+rattle+neighbourhood/7014335/story.html

(Sorry for double post. Forgot link in first post)

Bo Xilai
Guest
Bo Xilai

Central 1 Credit Union… Quelle Surprise?… Helmut Pastrik is one of those bank economists who has drank the most real estate koolade… Anyone ever notice he sort of look like Telly Monster (Elmo’s Friend from Sesame Street)?

http://www.cracked.com/funny-1003-sesame-street/

Crikey
Guest
Crikey

Anybody else see the “Think” contest winners announced?
http://www.vancouversun.com/business/THINK+Housing+contest+winners+announced/7013989/story.html

At the top of the article, an idea reclaim half of many existing 66 foot wide streets in order to make 10,000 new 33 foot wide homes.

Brilliant! This can cement Vancouver’s top spot for traffic congestion for decades to come. You think traffic is bad now, wait until all those people with daily commute shortcuts that cut through the burbs are forced back onto the main arteries.

patriotz
Member

US bubble now fully deflated in real terms:

In real terms, the National index is back to Q4 1998 levels, the Composite 20 index is back to March 2001, and the CoreLogic index back to May 2000.

As we’ve discussed before, in real terms, all of the appreciation early in the last decade is gone.

http://www.calculatedriskblog.com/2012/07/house-price-comments-real-house-prices.html

Can’t happen here? They said it couldn’t happen there.

space889
Member
space889

Shortage of downtown office space means it’s a good time to buy/build commercial properties! Apparently we are now even more like world financial centers like NY, Tokyo, London, etc because commercial property cap rates are down to 5% or under.

http://www.vancouversun.com/business/Does+Vancouver+investment+market+make+building+better+option/7013964/story.html

N
Guest
N

@Crikey:

I don’t think they were talking about changing the width of the roads, just the setbacks. Not that there aren’t other problems, but I don’t think current road widths is one of them.

Crikey
Guest
Crikey

@N:
At a glance, the article I linked to doesn’t clarify, saying the proposal is to “subdivide its standard 66-foot road allowances in two and building houses one half”. Haven’t had the time to look for and read the full report.

And yes – there are surely other problems. Depending on the location, many corner lots are considered to have greater value than comparable inside lots. I wonder how many people with corner lots that suddenly became inside lots would not be lining up for compensation or lawsuits.

Vote Down The Facts
Guest
Vote Down The Facts

@Crikey: “You think traffic is bad now”

Nope.

Simpatico
Member
Simpatico

And more interesting data on the tapped out Canadian. Very interesting is the note about the significant rise among Canadians in online searching using “bearish” terms…the sleeping masses are definitely wakening.

http://seekingalpha.com/article/741391-canadian-real-estate-and-household-debt

Many Franks
Guest
Many Franks

@patriotz: I’ve said it before and I’ll say it again:
http://www.youtube.com/watch?v=vKITpVovTAE

M-
Member
@Crikey: The first problem that I think of with the street narrowing proposal is with fire regulations– one reason corner lots are highly-valued is because you can put more windows around the side of the house. They often aren’t otherwise allowed due to fire risk– the risk of a fire in the neighbour’s house spreading to your house through a window. So if you have a corner lot, and a “new” corner lot is created next to you, the new neighbours’ house will be too close to your house, given the fire regulations surrounding side-windows. I bet the city staff will scrap that proposal– interesting, but details make it unworkable. With regards to Crikey’s concerns about effect on traffic, just make the newly-narrowed street a one-way street. Or make these lots along bike routes (traffic’s already “calmed” on those streets).
Anonymous
Guest
Anonymous

@Bo Xilai: I wonder if those of us who do our banking at Central 1 members like Vancity should be even more concerned given that the tightening in lending that just went into effect DID NOT apply to credit unions? http://business.financialpost.com/2012/07/12/credit-unions-escape-new-mortage-rules/

Simpatico
Member
Simpatico

(oops, didn’t login earlier) I wonder if those of us who do our banking at Central 1 members like Vancity should be even more concerned given that the tightening in lending that just went into effect DID NOT apply to credit unions? http://business.financialpost.com/2012/07/12/credit-unions-escape-new-mortage-rules/

registered
Member
registered

8 patriotz Says: “US bubble now fully deflated in real terms:”

Tempting bet. It’s unclear to me if long term rents were distorted by the run-up. Price/rent is bedrock to the financial rationality of ownership, however as a ratio it’s vague on the financial equilibrium of rents against income. Rents might have room for downward movement.
Ownership rates at 65.4% are also still above historic normals so a few balls remain in play. My money is on more declines.

patriotz
Member

@Simpatico:
You seem to be conflating the OSFI regulations, which apply only to federally regulated lenders, with CMHC regulations, which apply to ALL CMHC-insured mortgages regardless of lender (obviously I would think).

I think the change in CMHC regulations is a lot more significant.

b5baxter
Member

@Anonymous: Time to write your board members…..

Madashell
Guest
Madashell

Sales to be worst than 2008, all we need is less than 115 today. Come on Vancouver, I know you can do it.

VMD
Member
@patriotz: It seems like Flaherty is pushing/encouraging provincial credit unions to convert to federal credit unions, which allows them to “compete better with big banks” (is that true?). The catch is, once converted to federal credit unions, they’re under the watchful eyes of OSFI. According to the new framework announced few weeks ago: “Federal Credit Union Conversion Regulations: This proposed regulation sets out the requirements applicable to the “demutualization” process of a federal credit union into a bank with share capital. This regulation specifies the information that must be included to the conversion proposal to be approved by the Superintendent of Financial Institutions (Superintendent) and members of the federal credit union, and to the subsequent conversion application. It also grants the Superintendent certain powers that may be exercised prior to the approval of the conversion proposal. These powers include the… Read more »
good-format
Guest
good-format

@Madashell:

Normally, Paul’s sales number is a little higher than the official one. I would say it is almost a certainty that we have a lower sales than 2008.

VMD
Member

@Madashell:
The month-end tally of paulB’s daily sale #s tends to be slightly higher than REBGV’s official monthly sales #.

the realtors will likely need to pull off much better than 115 today for official REBGV sales # to be better than July 2008..

we’ll find out in 2 days

ScubaSteve
Member
ScubaSteve

Condo prices look like they are going to be way down MoM. They will lead the pack of price decreases now, as desperate sellers try to lower their prices to out-fox their neighbour. That’s the nice thing about condos… if one person lowers the price of their unit, it drags every other identical unit in the building down with it. Since we are at the top of the market, this will happen faster. People with huge unrealized gains will lower their prices quickly to ensure they lock in profit.

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