In preparation for another year of significant challenges, the chief executives of Canada’s biggest banks say they’re committed to keep credit flowing, but are doing so in a more prudent way.

Speaking at the RBC Capital Markets Canadian Bank CEO Conference, the executives emphasized that it’s “business as usual” for their lending practices.

“We are continuing to see loan growth across our various businesses,” said Gordon Nixon, president and CEO of Royal Bank of Canada.

Any tightening of the credit market, added Nixon, is a result of other financial services players tightening their lending practices.

“You’ve seen a large percentage of the marketplace –whether it’s foreign banks, or the automotive leasing companies, etc, — exit the marketplace,” he said.

He pointed to reports that leasing in the auto sector — an area in which banks are not active — has fallen from 43% to 20% in recent months.

“That’s a sector where banks have not been participant,” he said. “We can’t step in and substitute for that portion of the marketplace.”

But Nixon said the bank is lending prudently –something the heads of the other banks echoed — amid worsening economic conditions and expectations for rising loan losses this year.

BMO Financial Group, for instance, is taking precautionary actions by putting more emphasis on identifying lower quality borrowers and re-pricing loan premiums for customers in higher risk categories, said president and CEO Bill Downe. Although he has not yet witnessed rising delinquencies, he expects growth in this area will occur in the months ahead.

According to Nixon, growth in loan losses will simply bring them to “higher, more normalized levels,” after a few years of unusually low levels.

Although TD Bank Financial Group is committed to being prudent along with its peers, CEO Ed Clark said the current market also presents an opportunity to gain market share by lending when others are not.

“What we’re not going to do is turn down people who we think could repay us,” he said. “From a business point of view, I do want to take advantage of this and take market share.”

Coinciding with more prudent lending standards has been softening demand among borrowers, according to Downe.

“Looking at the next year, I don’t think we’ll see the same level of loan growth in Canada,” said Downe, noting that demand has already visibly dropped.

But Scotiabank has not yet witnessed such weakening, according to Chris Hodgson, group head of Canadian banking. “Surprisingly, the results that we see in our businesses is stronger than we would have expected given the economic environment,” he said.

Among other expectations for the year ahead, the chief executives expect deposits to rise as Canadians increasingly save their money through the economic downturn.

Demand for high interest savings accounts has already been on the rise at Scotiabank, according to Hodgson.

The chief executives also expect the turmoil to present business opportunities.

“I think we’ll come through it with opportunities in front of us as well,” said Nixon.

Increased margin spreads and trading activity, for instance, will likely present rewards in the wholesale business, he said.

There will also be significant activity in fixed-income securities, according to Downe. “The fixed-income market is going to come back to life in 2009.”

IE