Canada’s biggest banks have been setting aside hundreds of millions of dollars in case customers can’t pay off their loans, including mortgages.
This comes as economic uncertainty and the heightened cost of living weigh on Canadian households and businesses.
Royal Bank of Canada, TD Bank, CIBC, Scotiabank, Bank of Montreal and National Bank reported quarterly earnings this week and all said they have topped up their loan loss provisions.
At the same time, the banks have reported multi-billion-dollar profits in the most recent quarter.
These loan loss provisions are set aside in case a bank’s customers aren’t able to pay off their loans, which could mean the bank would take a loss by absorbing the remaining balance on those loans.
Mortgages, for example, involve a bank loaning an approved amount to a customer so they can eventually own their home by making smaller incremental payments to the bank.
Canada’s total mortgage debt reached nearly $2 trillion last year, according to a report from Equifax, and as many more households are expected to apply for mortgage renewals.
In the case of Bank of Montreal, it set aside an additional $746 million last quarter, which was down from the $1.011 billion a year earlier.
During a conference call with investors and analysts, BMO’s chief risk officer Piyush Agrawal addressed questions on the Canadian housing market, and said that there could be more delinquencies this year — where borrowers fail to make a mortgage payment.
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“We have seen the softness in Canadian housing. You can see that in the offtake and new sales. Inventory has been up a bit. Some of this might be the winter effect, some of this might be the impact of just the news uncertainty,” said Agrawal.
“In terms of our own portfolio, you’re seeing higher delinquencies … this is some of the stress in the Canadian consumer. We see that in consumer spend, we see this in other places. That’s the softness we’ve generally talked about.”
A separate report from the Canada Mortgage Housing Corporation said the housing market is expected to stay “subdued” through most of 2026, with a housing recession possible if the economic backdrop worsens. It describes how potential home buyers are taking a wait-and-see approach because of the uncertain economy and job market.
Royal Bank of Canada added $1.09 billion to its loan loss provisions compared to C$1.05 billion a year earlier.
Scotiabank increased its loan loss provisions by $1.176 billion last quarter, which was slightly higher than a year earlier.
TD Bank topped up its provisions in case of bad loans by $1.04 billion, down slightly from a year earlier.
CIBC set aside an extra $568 million, which was down a bit from last year.
National Bank’s provision for credit losses amounted to $244 million for the quarter, down from $254 million a year earlier.
Interest rates play a big role in the affordability of mortgages, car loans and other lines of credit, with those rates changing in lockstep with the Bank of Canada.
The benchmark interest rate set by the central bank sits at 2.25 per cent, where it has stayed since October, and after being cut four times in 2025.
When interest rates are cut, that can mean lower mortgage and other loan rates for some borrowers, while raising rates might make them more expensive.
CIBC’s chief risk officer Frank Guse delivered similar remarks to shareholders and analysts in a separate call Thursday and said the bank is aware of “softness in the economy.”
“We are seeing still some ongoing, I would say, softness in the economy. We have seen unemployment going up [and then] going down a little bit, but having to a certain extent plateaued. We do have the USMCA [United States-Mexico-Canada Agreement, also known as CUSMA] negotiations coming our way,” said Guse.
“There’s some uncertainty still ahead of us, but I’m not overly concerned with those numbers. We have the right strategies underneath, both from a business perspective and from a risk management perspective, to manage those portfolios very proactively.”
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