Fitch Ratings has lowered its rating outlook for Canadian Imperial Bank of Commerce (CIBC) to negative, amid concerns about the bank's exposure to the housing market, the New York City-based credit rating agency announced on Friday.
The change was announced as Fitch affirmed its ratings on Canada's Big Six banks and the Federation des caisses Desjardins du Québec.
CIBC "is the most exposed to potential housing correction and the health of the Canadian consumer," the rating agency says in a statement.
CIBC has seen residential loan growth of 12% year-over-year, well ahead of the average of 5.41%, which "is concerning at this point of the credit cycle," Fitch says. The bank's domestic mortgage portfolio represents 62.3% of gross loans, compared to the average of 49%, the rating agency notes.
Additionally, Fitch says CIBC has the largest exposure to Canadian consumers at 76.9% of total Canadian loans compared to the average of 66.8%.
Also Friday, Fitch restored its ratings outlook for Royal Bank of Canada (RBC) to stable from negative, noting that RBC's above-average exposure to capital markets business "has not translated into increased revenue and earnings volatility."
RBC has kept its reliance on capital markets revenues to approximately 25% of total revenue. "As such, Fitch does not believe that RBC's capital markets businesses will have an outsize impact on operating performance volatility over the medium term," it says.
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