It's Probably Nothing

| 19 Comments

Zerohedge;

Sadly for Canada, it's not only raining, it's pouring for the country's energy industry, a downpour which is about to migrate into its banking sector. Which is why it is indeed time to take a somewhat deeper dive into the Canadian banks' balance sheets, where we find something very troubling, and something which prompts us to wonder if the time of freaking out about European banks is about to be replaced with comparable panic about Canadian banks.

Related. (h/t Dan)


19 Comments

I have been retired on my own dime for over ten years now, and every year the purchasing power of my modest investments are diminished by the ever increasing money supply and government debt. people are going to get a serious kick in the ar se in this country and maybe before young trudeau totally buries us in more debt. he may not even get the chance to bury us. he is enlarging the threat of islam to Canada, and the fools in this country think it is just fine that we are helping those who would kill us in a heartbeat if they were in the majority. STUPID.

First it will spill into real estate,then into the banks.

To understand the likely extent of loan losses look no further than Exhibit 7 of the ZeroHedge article. Loan losses increased from an average of $1.5 billion to about $3 billion (a 50% increase) during the last oil crisis. This is not a large amount in comparison to the total capitalization of Canadian banks which, on its own, completely invalidates the article.

And other things like this...

"In fact, US banks have more than double the level of allowances against loans versus the Canadian banks. However, we should also point out that the US banks also have approximately double the level of impaired loans that the Canadian banks have and loan mixes are quite different."

The US banks have double the allowance against impaired oil & gas loans compared to Canada (that is good). Yet the US banks have twice the level of exposure to impaired loans from the oil & gas sector (that is bad). And yet only the Canadian banks are perceived as being in trouble?

The Canadian banks are not in trouble. Alberta's economy is.

Steve from Rockwood >

"The Canadian banks are not in trouble. Alberta's economy is."

Splitting hairs.

Regardless there will be plenty of great Alberta property and business deals as the NDP helps tank the Alberta economy over the next couple of years. Those that buy in prior to their lynching in the next election/ by-election will make out like bandits.

The best part is that Alberta is draining out the deadbeats and malcontents!


http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/oil-price-plunge-flipping-migration-patterns-with-people-leaving-alberta/article28297733/

“There is a very clear correlation between migration and oil prices,” said Benjamin Tal, deputy chief economist with Canadian Imperial Bank of Commerce. “When oil prices go up, everybody is going to Alberta. When [oil] goes down, they leave. And that is exactly what we are seeing.”

Finally!

Enjoy the relative peace and tranquility of the present. ****'s about to get real. And fast.

Knight 99.

The deadbeats and malcontents are still in Alberta. Net migration to the province is still positive. It's just down substantially from the highs of 30,000 per year during high oil prices.

I feel for the province. Very few people realize how dependent Alberta is on the oil economy. You can see this ignorance in the talks about diversification away from oil & gas toward ... well nothing yet. More infrastructure, more doctors and teachers, more hospitals, roads and public transportation. That is actually more dependence on oil & gas because more revenue is needed to support the expanded infrastructure, but Notley will figure that out eventually (within 3 yrs and 9 mns).

The Canadian banks will have to start absorbing losses from oil & gas companies in late 2016 and 2017. We're still not there yet. Many of the juniors will see their operating lines of credit cut in half making them effectively insolvent. They will have no alternative but to merge with the larger players that will absorb the junior's existing debt. So the banks won't suffer too much but the shareholders of the juniors will take significant haircuts.

Pierce has the right answer regarding the banks. But the overall economy will have to crap out first.

Well, it's not nothing but it's not nearly as significant as ZH makes it out to be. The article makes a big deal about the $2.4 billion pro forma loan loss number but RBC alone makes $2.5 billion in profit per quarter. The big 5 banks made $35 billion last year. Now, they aren't immune from damage and, yes, there will be some bad loans and some big ones at that but the Canadian banks are so conservative and so diversified that it would take a complete and total economic meltdown across the entire country to blow them up.

Yep. One thing I have come to learn over the years: If you're worried about a possible economic calamity, keep an eye on Zerohedge. If it's mentioned there, it always ends up being not-so-bad.

They're kinda like the Gore-effect for economic matters.

Elections have consequences.
Interesting that Notley, Coderre and Will O' the Lisp Turdeau are out to pull the rug out from Alberta oilsands by choking them off without pipeline and shipping routes to Northern BC and tide water. They looked like excited schoolchildren on Christmas morning at COP21.
Now all we see is deer in the headlights. I can see Canadian banks falter, the TSX drop off the cliff and Canadian companies restructure creating huge unemployment. The Libs will soon see they do not create the economy, business does.
When EI runs out for all the laid off workers and there's not enough to pay the vehicle loans, personal loans and ridiculous mortgages that is when you see the banks and Bay Street howl.
By then it will be too little, too late.
As Captain says Enjoy the Decline, sit back make some popcorn and watch Zoolander lisp his way to 2018.

Remember, the banks don't even have to dip into their profits to cover bad mortgages until after the CMHC runs out...

Not to worry ... I am sure Canadian banks are just as big enough not to fail as American banks ... so long as you all lay-back spread your legs and give up your wallets. YOU TOO can have a multi-trillion dollar stimulus program that creates about 100 shovel ready jobs ! Enjoy your decline Canada !

Mortgages with non-recourse have over 20% down and aren't insured with CMHC

Wrong, Quicksilver, the Libs will NEVER see they do not create the economy. They know that works for themselves and their power brokers so they assume a similar outcome for the rest of us. Reality is not their strong suit

Here's some simple math that I think helps explain the severity of what is happening in AB:

Two years ago AB exported 140 billion in oil (us$).

This year at these prices it wil be less than 40 billion.

Adjusting for currency that difference is around 85 billion.

Alberta's gdp 2 years ago was barely 300 billion.

So that's a thirty percent drop in gdp this year and likely sme very year hear after. That's not a recession. It's a depression.

I stand corrected Dirtman.
Sorry, I was assuming that this reality would hit them square between the eyes and they would be able to deduce that their policy beliefs are wrong. Just like the AGW crowd.....
I cant even think like a Libtard. Lol

I could not agree more.

We are in fact in a downward spiral and it concerns me large...So far house values in Calgary for those of us in the more modest homes under 500-525 are still in a demographic of being sought after....anything above that..not so much.

And we all have to remember that the banks have the option to BAIL IN. Good thing I owe rather than have any cash with them. When things go in the toilet...they can keep my RRSP cause it likely wont be worth squat and they can also eat my debt cause I wont be able to pay them with no job or likely hood of ever doing so. Not that I'm in the toilet...still working in Oil n Gas, making good bucks and paying my debt/share...but I'm also cognizant of the coming storm and sink more and more of my cash into Gold & Silver coins and bullion.

To Hell with the BANKS and their paper/polymer fiat crap.

Zero Hedge = the climate change nutjobs of the finance world.

Zero Hedge tends to be sensationalist.

It has also sometimes been right in its sensationalism -- thereby burnishing its dissident aura -- but the key word is "sometimes". They are worth a read but I wouldn't bet your house or your portfolio on their dire prognostications.

Now that's scary, this talk about the big Canadian banks being in trouble. Half of my non registered investments are in the market either as shares or mutual funds. What to do, what to do.

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  • rabbit: Zero Hedge tends to be sensationalist. It has also sometimes read more
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  • Quicksilver: Mortgages with non-recourse have over 20% down and aren't insured read more
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