Risk officers took centre stage on earnings calls as words like "uncertainty" and "fluid" came up repeatedly, as all warned of the potential for the economy to go into retreat on the combined pressures of supply chain problems,
"There's certainly more uncertainty," said BMO chief risk officer
RBC chief executive
"From that perspective, markets are struggling to predict how we land the economy, do we land it with a slight recession? And our message today is, it could go either way, it's 50-50."
The economic picture has shifted markedly from last quarter as energy prices have spiked since
"Since February, things have changed," said
"The war is a reality in
But as McKay noted, there are also still many healthy indicators, at least looking back over the three months to the end of April.
All the banks reported loan growth either nearing or into double digits from a year earlier, while credit card spending has jumped as COVID-19 restrictions fade away.
And while mortgage-fuelled loan growth has raised concerns about over-leveraged households, the banks emphasized the improved credit profile of its clients during the pandemic and the strong job market that is helping to support spending.
All banks but TD increased their dividends in a sign of financial confidence.
The banks themselves are also poised to benefit from rising interest rates, with RBC noting it has already seen a
But the banks are no doubt preparing for a potential change in the economic picture as they plug in tougher scenarios to their risk analysis.
"Given the macroeconomic environment, we run stress tests that would have more harsh inputs today than we would have possibly a year ago," said Scotiabank chief executive
The mortgage market is already slowing on the higher rates, while banks are seeing expenses rise on salary and other pressures, leading some to strike especially strong notes of caution.
TD chief risk officer
"The situation is quite fluid right now. And what the future holds, who knows. But to the extent we are in a recessionary scenario, or even in a stagflation kind of scenario, it is possible we may have to build results. I think, at this point, because we are seeing all this uncertainty, we're just being very prudent, very careful, thoughtful and deliberate."
This report by
Companies in this story: (TSX:TD, TSX:RY; TSX:BMO; TSX:CM; TSX:BNSB)
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