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2015-02-23 20:15:00

OIL PRICES FOR BANKS

OIL PRICES FOR BANKS

A protracted period of low oil prices will negatively impact Canada's major banks more than it will their regional neighbours to the south, says Moody's Investor Services.

"For Canada's major banks, the credit costs on energy-sector loans would rise if oil prices were to remain low for too long, which would hurt the banks' profitability," said David Beattie, a Moody's senior vice-president, in a release.

"Given the historical relationship between oil prices and the impairment rate for energy-related loans, we expect some mild erosion in these loans' asset quality in the coming quarters."

Moody's said revenues from underwriting and capital markets activities could also decline because of potential spending cuts by the major Canadian banks' oil and gas clients.

But the scale and diversity of the Big Six should help partially offset any rise in impaired energy loans and declines in capital markets revenues, the ratings agency said, adding that the credit risk associated with energy-sector loans by U.S. regional banks is more manageable.

"Declining energy costs could actually be positive for the US banks' operating environment, with a neutral to positive effect on their overall asset quality," said Allen Tischler, a Moody's senior vice-president in the same release.

"In many cases, the US banks with the highest exposures are also the most experienced in underwriting energy-sector loans."

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Tags: OIL, PRICES, CANADA, U.S., BANKS

Chronicle:

OIL PRICES FOR BANKS
2018, June, 18, 14:00:00

U.S. IS BETTER

IMF - Within the next few years, the U.S. economy is expected to enter its longest expansion in recorded history. The Tax Cuts and Jobs Act and the approved increase in spending are providing a significant boost to the economy. We forecast growth of close to 3 percent this year but falling from that level over the medium-term. In my discussions with Secretary Mnuchin he was clear that he regards our medium-term outlook as too pessimistic. Frankly, I hope he is right. That would be good for both the U.S. and the world economy.

OIL PRICES FOR BANKS
2018, June, 18, 13:55:00

U.S. ECONOMY UP

IMF - The near-term outlook for the U.S. economy is one of strong growth and job creation. Unemployment is already near levels not seen since the late 1960s and growth is set to accelerate, aided by a near-term fiscal stimulus, a welcome recovery of private investment, and supportive financial conditions. These positive outturns have supported, and been reinforced by, a favorable external environment with a broad-based pick up in global activity. Next year, the U.S. economy is expected to mark the longest expansion in its recorded history. The balance of evidence suggests that the U.S. economy is beyond full employment.

OIL PRICES FOR BANKS
2018, June, 18, 13:50:00

U.S. INDUSTRIAL PRODUCTION DOWN 0.1%

U.S. FRB - Industrial production edged down 0.1 percent in May after rising 0.9 percent in April. Manufacturing production fell 0.7 percent in May, largely because truck assemblies were disrupted by a major fire at a parts supplier. Excluding motor vehicles and parts, factory output moved down 0.2 percent. The index for mining rose 1.8 percent, its fourth consecutive month of growth; the output of utilities moved up 1.1 percent. At 107.3 percent of its 2012 average, total industrial production was 3.5 percent higher in May than it was a year earlier. Capacity utilization for the industrial sector decreased 0.2 percentage point in May to 77.9 percent, a rate that is 1.9 percentage points below its long-run (1972–2017) average.

OIL PRICES FOR BANKS
2018, June, 18, 13:45:00

SOUTH AFRICA: NO BENEFITS

IMF - South Africa’s potential is significant, yet growth over the past five years has not benefitted from the global recovery. The economy is globally positioned, sophisticated, and diversified, and several sectors—agribusiness, mining, manufacturing, and services—have capacity for expansion. Combined with strong institutions and a young workforce, opportunities are vast. However, several constraints have held growth back. Policy uncertainty and a regulatory environment not conducive to private investment have resulted in GDP growth rates that have not kept up with those of population growth, reducing income per capita, and hurting disproportionately the poor.

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