Canada's Banks Lost C$22 Billion in Capital Markets, Moody's Reports

Canadian banks lost C$22 billion ($20.9 billion) between 2007 and 2009 from capital markets investments, increasing risk for the lenders’ bondholders, Moody’s Investors Service reported in a study.

Canadian banks have expanded their capital markets businesses, leading to losses that were equal to 22 percent of “core” earnings over the period, the ratings company said today. The lenders now rely on investment banking for about 30 percent of profits, Moody’s said.

“For bank bondholders, this growth in capital markets activity creates a significant amount of incremental risk,” Peter Nerby, a co-author of the report, said in a statement.

Canadian lenders reported that declines in investment banking fees such as trading revenue lowered profits in the fiscal third quarter. Toronto-Dominion Bank reports results tomorrow, the last of Canada’s six largest lenders to do so.

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.

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