Last quarter, Canada’s third- and fourth-largest lenders, Bank of Nova Scotia and Bank of Montreal, received a lift as businesses raised borrowing to fulfil client demand.
In the three months leading up to April, commercial-loan balances at Scotiabank’s domestic banking arm increased 19 percent to C$72.7 billion ($56.5 billion), while Bank of Montreal’s Canadian business increased 13 percent to C$96.2 billion. Both lenders’ fiscal second-quarter profit surpassed analysts’ expectations.
While the economic outlook has dimmed due to predictions of more interest-rate hikes, preliminary data suggest that Canada’s economic growth at the start of the year outperformed expectations, and the jobless rate fell to its lowest level since 1976 last month. As a result, firms in the country are paying more to increase output and store goods to avoid supply-chain disruptions.
“You had quite a bit of reopening and a lot of consumer demand in the quarter, so businesses are working to produce more,” said Bloomberg Intelligence analyst Paul Gulberg. “Businesses are also staring down the interest-rate increases that are coming, so they’re borrowing more now to lock in at lower rates.”
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