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TEXT-Fitch: Canadian banks expected to face moderated earnings growth
July 16, 2012 / 8:04 PM / 5 years ago

TEXT-Fitch: Canadian banks expected to face moderated earnings growth

July 16 - Earnings growth for Canadian banks is expected to moderate over
the rest of 2012 although profitability will likely remain at sound levels,
according to the midyear outlook report published today by Fitch Ratings.

The six largest Canadian banks reported better than expected earnings for the
first half of 2012. Loan quality remained favorable by many international
comparisons, and levels of impaired loans were consistent with relatively modest
charge-off ratios. These results, along with favorable funding positions and
sound capitalization, support Fitch's Stable Rating Outlook for these Canadian

Fitch believes household debt, driven by mortgage credit expansion, is the main
direct threat to the credit risk profiles of Canadian financial institutions.
Canadian households have become more vulnerable to adverse shocks given the
record level of household debt to personal disposable income ratio (154.3% in
the first quarter of 2012). The second-order effects of the crisis in Europe
could also weigh on the rating profiles of the six largest Canadian banks.

Regulatory actions, however, could mitigate risks, as Canadian regulators are
cognizant of housing market threats and have taken measures to curb residential
lending and enhance the quality of approved borrowers.

The full report 'Canadian Banks: 1H12 Results and Midyear Outlook' is available
at ''

Additional information is available at ''.

Applicable Criteria and Related Research: Canadian Banks: 1H12 Results and
Midyear Outlook

 (New York Ratings Team)

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