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Mar 27, 2019

Banks can grow profits, dividends amid debt fears: National Bank CEO

National Bank CEO shrugs off debt fears


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The chief executive of National Bank of Canada struck an optimistic tone Wednesday about the sector’s ability to manage through household debt concerns in this country.

Speaking at a financial services conference in Montreal, Louis Vachon applauded policymakers for stepping in to “control” debt-to-income ratios in Canada.

“I think there will be limited growth in consumer debt in this country going forward … I think that’s probably a desirable thing from a macroeconomic standpoint,” he said.

“I think the franchises of the banks, and of National Bank, are diversified enough to be able to still grow earnings and continue to grow dividends.”

Vachon’s comments come one day after Veritas Investment Research recommended investors lighten up on Canada’s Big Six banks amid concern about a looming wave of credit losses.

Nigel D’Souza, financial services analyst with Veritas Investment Research, said in an interview with BNN Bloomberg Tuesday that he expects share prices of Canada’s big banks to drop between 10 to 20 per cent – or “maybe greater” – this year.

D’Souza downgraded Bank of Montreal, meaning the analyst now has sell recommendations on each of the country’s largest lenders.

However, Vachon on Wednesday said that the government’s moves to limit consumer debt have had a desirable effect. 


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    “We’ll still have to see the final outcome of this particular episode, but at least I’m happy to see preemptive measures taken by the government and by the banks in terms of trying to control the upside of debt-to-income ratio of consumers in this country,” Vachon said. “So it’s starting to level off, which is a good thing, because I think that was ultimately the objective.”

    Vachon also added that if the Canadian labour market remains as strong as it is now, National Bank doesn’t expect a significant increase in loan losses – or a recession.

    “The biggest issue I hear from companies still is a lack of manpower, and that does not suggest an imminent recession,” he said.