With Canadian consumers increasing their debt-to-disposable-income ratios, Canadian credit card issuers face unprecedented risks, according to a new report released by Deloitte.

Credit card issuers in Canada have traditionally seen loss rates of less than 4%, a figure much lower than that of their U.S. counterparts (6% and growing), says credit rating agency DBRS.

The Deloitte report notes that Canadian consumers have increased their debt-to-disposable-income ratios to more than 130% — a rate currently higher than that of the United States.

Deloitte recently interviewed executives at major credit card issuers in Canada representing over 54% the country’s outstanding credit card balances. The majority of executives indicated that beginning in October 2008, they started to see a 5% to 10% jump in delinquencies, which have increasingly translated into write-offs. The result has been an increase in losses of 50-100 basis points (100 basis points equals 1%). At the upper end of this range, this represents annualized losses of over $800 million to the industry as a whole, where the total value of outstanding balances is in excess of $80 billion, according to the most recent Nilson Report dated February 2008.

Many of the Canadian credit card issuers that have aggressively grown their portfolios in the last few years will likely suffer higher credit losses in the months ahead, Deloitte says.

IE