The outlook for the Big Six Canadian banks is brighter now than it was a year ago, according to a new report from Toronto-based credit-rating agency DBRS Ltd.
“In DBRS’s view, the large Canadian banks are well positioned to benefit from improving global growth, lower unemployment and increasing interest rates,” the DBRS report says. “Backed by strong franchises, high liquidity and adequate capital, these banks have the capacity to seize opportunities and potentially gain market share in the North American banking landscape.”
The DBRS report notes that the banks have continued to grow their revenue despite weak gross domestic growth and historically low interest rates. In addition, the recovery in oil prices has been a positive for the banks in general, adding that it expects this to continue in the year ahead.
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Housing prices remain a key risk for the banks, DBRS says, although the fears of a “housing bubble” have subsided amid policymakers’ efforts to cool the market.
Another potential risk is cybersecurity, the report says, noting that almost all of the big banks’ CEOs have “expressed a heightened concern regarding the increase of cyberattacks and the need to accelerate coordination and investment in cybersecurity.”
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The global rise in populism and the threat of increased protectionism also poses a possible risk to the banks, the report adds: “While an outright reversal of trade liberalism is unlikely, increasing protectionism could impede growth in Canada’s trade-reliant industries, which could be detrimental to regional economies and governments.”
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