National Bank of Canada is about to release earnings. Some American investors are concerned about real estate and mortgage exposure by Canadian Banks. Ponder this Bear Case Scenario.
National Bank Capital is the smallest of the big six in Canada. they have the smallest cushion to deal with problems.
Canadian consumers are fairly maxed out with consumer debt, car loans, plastic, lines of credit and other tools of enslavement. There are serious limitations to growth in the consumer portfolio which National Bank has relied on.
Low interest rate environment keeps margins down. as long as interest rates stay low National Bank will not be hitting home runs.
While National Bank has a real estate and mortgage exposure; most mortgages are underwritten by the Canadian Government which has a “AAA” rating. This is not where the problem will be.
George Gutowski writes from a caveat emptor perspective.