S&P lowers ratings on six Canadian financial institutions
Dec. 14 2012
S&P said Thursday it was downgrading Bank of Nova Scotia, the country’s third-biggest bank, and National Bank of Canada, the sixth-largest lender, by one notch. The agency also lowered its ratings on Central 1 Credit Union, Caisse centrale Desjardins, Home Capital Group Inc. and Laurentian Bank of Canada by one grade.
... as bond-rating agencies take a harder look at the slumping economy, high consumer debt, and low interest rates, which are expected to cause a slowdown in bank profitability in the coming year. Other agencies, such as DBRS and Moody’s have moved to downgrade their ratings of Canadian financial institutions by one notch in recent months.
For British Columbians, news that a leading credit rating agency was sounding the alarm on the province’s debt and economic outlook must have come as a shock.
Last year’s projections in B.C. for natural gas revenues have become irrelevant. Royalties have shrivelled to peanuts in the current economic environment. In the meantime, the housing market has slowed to a crawl. Not only are fewer homes being built, but the sale of existing homes can now safely be described as worse than sluggish.
In a real estate-centric market such as Greater Vancouver, this has a trickle-down effect. The government is seeing significantly less tax money from property transfers and goods and services associated with the real estate market – the sale of furniture and appliances, for example.
The news gets worse when you consider that British Columbians have the highest personal debt levels in the country, thanks in part to the massive mortgages they carry. A drop in house prices of 20 to 30 per cent, which could happen, could spell doom for many people who would no longer have the asset value to pay off their debts.
Not surprisingly, the B.C. government is playing down Wednesday’s announcement by Moody’s Investors Service that its Triple A credit rating is in jeopardy.
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