Canada's banks feel pain of oil price rout, economic slowdown

Thu Feb 25, 2016 4:30pm EST
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By John Tilak and Euan Rocha

TORONTO Feb 25 (Reuters) - Faced with a double whammy of the oil price collapse and a sluggish economy putting pressure on their corporate and consumer loan books, Canada's major banks started to show cracks this week as they posted another round of quarterly profits.

After reporting quarter after quarter of market-topping results in recent years, the lenders were feeling the pull of gravity.

Royal Bank of Canada, Canada's biggest lender, did not meet profit estimates on Wednesday for the first time since early 2013, and No. 2 player Toronto Dominion Bank reported a slim profit miss on Thursday.

Bank of Montreal and Canadian Imperial Bank of Commerce both topped analyst expectations, but also revealed that bad energy loans were on the rise.

The tone of bank executives on conference calls reflected the gloomier outlook as well.

"We're starting to see the spillover impact from the energy patch onto the consumer loan books," Barclays analyst John Aiken said. "You're going to see increasing provisions against their energy portfolio through 2016, and that should likely coincide with rising consumer charge-offs by the middle of the year."