TD Bank Group Among Canadian Lenders Put on Credit Review

Moody’s Places Six Canadian Banks on Review for Downgrade
Toronto-Dominion Bank's TD Canada Trust Tower, left to right, Bank of Montreal, Canadian Imperial Bank of Commerce and Scotiabank Capital Trust offices stand on Bay Street in Toronto. Photographer: Brent Lewin/Bloomberg

Toronto-Dominion Bank, the last publicly traded lender rated Aaa by Moody’s Investors Service, was among six Canadian banks placed on review by the ratings firm, which cited high consumer-debt levels and housing prices.

Bank of Montreal, Bank of Nova Scotia, Caisse Centrale Desjardins, Canadian Imperial Bank of Commerce and National Bank of Canada are also being evaluated, Moody’s said today in a statement.

The review was prompted by “concerns about high consumer-debt levels and elevated housing prices, which leave Canadian banks more vulnerable to increased risks to the Canadian economy,” David Beattie, a Moody’s vice president in Toronto, said in the statement. Canada’s banks have been ranked the world’s soundest for the past five years by the World Economic Forum.

“We’re looking at the Canadian banking system in the context of our concerns about the convergence of some negative trends that we see out there, some domestic and some macroeconomic trends,” Beattie said in a telephone interview.

The ratings for Royal Bank of Canada, the country’s largest lender, were affirmed. The Toronto-based bank had its credit rating cut two levels to Aa3 by Moody’s on June 21 because of its “significant exposure” to volatile capital markets activities.

‘Well Capitalized’

“TD continues to be well capitalized and remains one of the safest and strongest banks in the world,” Stephen Knight, a Toronto-Dominion spokesman, said in an e-mailed statement. “TD continually evaluates its portfolio and conducts regular stress tests to ensure its portfolio is consistent with its conservative risk appetite.”

Spokesmen for the five other Canadian lenders didn’t immediately return phone calls seeking comment.

“All they’re saying is they’re just repositioning the Canadian bank ratings within their global scale,” said Peter Routledge, an analyst at National Bank Financial in Toronto who was previously a senior credit officer at Moody’s. “If you owned a bond issued by a Canadian bank, you would not be more afraid of losing your money as a result of this action.”

The Moody’s review, which will take about 90 days, follows a similar outlook downgrade by Standard & Poor’s Ratings Services in July.

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