Are Canadian Banks No Longer A Safe Haven for U.S. Jobseekers?
Can it really be that Canada is finally succumbing to some of the U.S. propensity for work slowdowns, layoffs, and erring on the side not hiring in order to hang onto cash or at least get their bearings until things stabilize?
Canadian careers guru Alan Kearns observes banks have clearly been spooked by the latest intenense gyrations in U.S, stocks, creating an environment in which "the overall growth (hirings) people were anticipating heading into the fall is going to be muted."
"Some of the growth plans that might have been anticipated this quarter may be extended out until next quarter, says Kearns, founder of Toronto-based CareerJoy, the national career and leadership coach.
Consider the following:
Tyler Durden of Zero Hedge blogged late last week that Canada may be the Next Domino To Fall," and illustrating his point with a chart showing TCE [tangible common equity ratios] of banks worldwide, and stating that "...of the banks with a TCE ratio of under 4% a whopping 30% are those situated in Canada, the same place where nobody thinks anything can go wrong, and which has been completely spared from the retribution of the bond vigilantes."
There is one place "where banks are potentially in just as bad a shape as anywhere else in Europe. That place is.... Canada," Durden wrote.
Adding some credence to that report, if also questioning its veracity, The Globe and Mail asked "Do our lenders deserve the kid-gloves treatment? Not necessarily, argues a blog post making the rounds from Zero Hedge blogger Tyler Durden, who despite inexplicably naming himself after the Brad Pitt character in Fight Club often makes some pretty good points about financial markets and has a large following."
His remarks read as "Scary stuff at first blush," says the Globe and Mail commentary, which goes on to conclude that "If one believes that housing is in for a severe correction in Canada, and that Canadians won't repay their mortgages when the value of their homes falls, and that the banks will have to take significant write downs on the portions of their mortgage portfolios that are not insured by the federal government, then maybe you will come to the conclusion that Mr. Durden is onto something." Otherwise not.
Canadian bank stocks fell
Canadian markets slid last last week, as strong commodity prices were overshadowed by remarks from Bank of Canada Governor Mark Carney, who suggested that Canadian growth over the second half of the year will be slower than initially thought.
Toronto Dominion Bank, with more than 1,000 U.S. branches, dropped 2.7 percent Friday to C$72.03, after Citigroup Inc. and JPMorgan Chase & Co. cut their U.S. growth forecasts, Reuters reported. Royal Bank of Canada, its bigger rival, slipped 2 percent to C$49.45. Bank of Nova Scotia declined 3.2 percent to C$50.80. As recently as August 10, Reuters reported that Canadian bank stocks looked to be "a cozy hideaway."
Finally, rating agencies may be gaining as much influence these days in Canada as in the U.S, presuming an authority similar to elected officials:
Moody's Investors Service said that two Canadian banks - Royal Bank of Canada and Toronto-Dominion Bank - fit some globally established criteria for identification as systemically important financial institutions that will be subject to higher capital requirements and other measures aimed at ensuring continued stability.
The global Basel Committee, which identified 28 banks but did not name them, ranked institutions based on size, interconnectedness and complexity, as well as cross-jurisdictional activity and lack of "substitutability."
Moody's used the first three metrics, with a focus on the size of capital markets activities at the various financial institutions. RBC, which has been very aggressive in capital markets and has continued to add to its investment banker ranks in places including New York, also saw a small Moody's downgrade late last year (to an Aa1 rating) late last year:
"RBC has been lauded as one of the big Canadian banks to survive the financial crisis relatively unscathed, but Moody's is a little bit worried about the bank's commitment to growing its capital markets business, "which potentially exposes bondholders to increased earnings volatility and poses significant risk management challenges," the agency said.