During the pandemic, big Canadian banks provided mortgage payment delays for customer experiencing financial difficulties. Deferrals will, however, weigh heavily on the banks’ future profitability, especially if they rely on quick economic recovery. This may lead to increased provisions and fees eventually resulting in earning lower than expected. Experts warn that the earnings can only start recovering when employment surpasses 80% of pre-crisis levels. This may take prolonged time as Canadian economy is still projected a decline of 15% or more in the current year.
- Banks in Canada are deferring mortgages at a much higher rate than US banks.
- Experts are afraid that this high rate will make banks weaker in the long term.
- However, banks think that they will still be able to recover quickly after the pandemic.
“Over the past three months, Canada’s Big Six banks have offered mortgage deferral options to a consumer base burdened by reduced working hours and job losses.”