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 QuĂ©bec.
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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