Fitch Ratings says that its outlook for the major Canadian banks for 2013 is stable, reflecting the banks’ consistent earnings performance and generally stable financial profiles.
The rating agency adds that its outlook also reflects the ongoing solid profitability of the Canadian banks, which “continues to be supported by a diversified business mix and comparatively low levels of credit costs associated with stable asset quality indicators.”
It does expect that earnings growth will likely moderate in 2013, as the banks face a less favourable economic environment. And, it cites the elevated levels of household debt, and possible deterioration in the Canadian housing market, as the key credit concerns for the sector.
“Fitch views the major Canadian banks as having sufficient capital cushion to absorb some levels of deterioration in the housing market,” it says, but record levels of consumer indebtedness leaves Canadian households much more exposed to an adverse shock than in previous periods, it notes.
“Ratings could come under pressure should borrowers’ ability to pay weaken due to a worsening of domestic or global economic conditions,” it adds.