Canada's Banks Maintain Cautious Stance Amid US Trade War Escalation

Bank CEOs in Canada are sounding cautious about the escalating US trade war, but they believe consumers and businesses have shown resilience so far. Loan defaults remain within their expectations since the trade tensions began over a year ago.

Royal Bank of Canada CEO Dave McKay said that credit risk across clients has improved as they adjust to uncertainty. Companies are pulling back on investments and borrowing in response to ongoing economic uncertainty caused by tariffs. 'They're going to manage their expenses not knowing the duration of this conflict and the magnitude of the loss of those clients' bases, and whether they can pivot their sales to another market or not,' McKay said.

The banks are maintaining higher capital levels as a buffer against possible trade war effects. Scotiabank CEO Scott Thomson reported seeing some stress across mortgages in Toronto and Vancouver but no significant issues with its loan portfolio for small business, commercial, and auto loans.