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  • Frank Tian

Canadian Banks Up Q4 '22 Reserve

🇨🇦 Big 5 Banks wraps up fiscal year ‘22

With a meaningful allowance Increase.

In Q4 (ending Oct), the collective reserves are up 5.9% Q/Q, or $1.3 billion CAD.

The 3-year journey:

🟥 In 2020, 5 banks quickly raised the reserves by 70~% or $12.6 billion, in fear of the pandemic recession.

🟩 In the 6 quarters after, 70% of the reserves build-up or $8.9 billion was gradually released. The public and private relief programs steered clear of the worst scenario.

🟨 In Q3/Q4 F’22, after two increases, the total reserves are 28% or $5.1 billion more than the pre-pandemic level in Q1 F’20.

Behind the allowance increases:

🟦 Fast rate hike

BoC raised the rate by 50 bps on 12/07 - the 7th time in 2022.

The cumulative 400 bps increase this year put consumers and businesses with high debts to the test.

🟦 High inflation

Oct inflation down to 6.9% Y/Y vs. 8.1% in June.

It remains high. For consumers whose income cannot keep up, it means shrinking wallets.

🟦 Resilient job market

Sep # job vacancies remain high near 1 million.

A healthy job market helps cushion the downfall of layoffs, while sustaining the consumers’ demand.


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