Fitch Ratings has lowered its view of Canada’s banking sector, amid concerning levels of household and public debt.
In a news release published on Thursday, the credit rating agency downgraded its view of the big five Canadian banks from AA to AA-, citing surging debt levels as a disadvantage to credit conditions and business volumes in the long-run. Due to the overall downgrade, Fitch also lowered its credit rating of RBC to AA-, to match Canada’s remaining big five banks.
In its report, Fitch added that the new reduced credit rating for Canada’s overall banking sector will also result in a limit on any forthcoming upward revisions to an individual bank’s rating. The latest downward shift is in response to what Fitch says is a growing level of debt that is becoming worrisome. The credit rating agency projects that private credit amounted to approximately 210.4% of total GDP by the end of 2020— the highest across comparable markets.
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Fitch acknowledged that although debt servicing costs have become more accommodative amid the central bank’s dovish monetary policy, the share of private-sector income being directed towards servicing debt has been soaring as of late, putting Canada at a disadvantage compared to other developed economies.
Information for this briefing was found via Fitch Ratings. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
