Newspaper article The Canadian Press

Canadian Banks Will Struggle with Strong Growth in Lending Slowdown: Analysts

Newspaper article The Canadian Press

Canadian Banks Will Struggle with Strong Growth in Lending Slowdown: Analysts

Article excerpt

Canadian banks to face challenging 2013

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TORONTO - Canada's biggest banks are likely headed into a challenging year as consumer lending growth slows alongside persistent economic weakness, analysts suggest.

The combination could provide a dark lining to what are expected to be good earnings results for the first quarter when most banks report starting this week. But it will also set the stage for a cautious remainder of the year.

Analysts expect most of the big banks will increase their dividends in the period.

Much of the concern lies in the domestic retail banking operations, the side of the business dedicated to consumers, which has fared well in recent years. The division could weigh heavy on the banks' overall growth, as Canadians face record-high debt levels and the housing market comes off its highs.

"It's just a matter of the magnitude of (the consumer lending) decline and what it means for the underlying financials," said Tom Lewandowski, financial services analyst with Edward Jones in St. Louis.

He said the focus will be on whether the banks are able to offset the decline through other lending venues to businesses.

Last month, Royal Bank (TSX:RY) chief executive Gord Nixon said the bank was experiencing a weakness in mortgage lending due to the slowdown in the real estate market. He said that while he expects the country's housing market to remain solid, lending would likely slow to mid single digits.

Bank of Montreal (TSX:BMO) will be the first to report its first-quarter earnings on Tuesday. Consensus expectations are for earnings per share of $1.47 and $3.88 billion in revenue, according to a survey by Thomson Reuters.

On Thursday, Royal Bank is expected to post earnings per share of $1.32 with revenues of $7.6 billion. TD Bank (TSX:TD) expectations are for $1.93 earnings per share and revenue of $6 billion.

Both CIBC (TSX:CM) and National Bank (TSX:NA) will be closely watched because they rely most on their domestic banking operations which could make them especially vulnerable to the slowdown. …

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