9% Commercial Loan growth looks good for banks, economy

It is so easy to fret about the Canadian economy.

Lacklustre job growth, Ontario’s oppressive government debt, regular plant closings…. And yet, when one looks at the balance sheets of Canadian banks, businesses are actually taking advantage of unusually low interest rates and putting their bank lines to work. Over a twelve month period, net commercial lending to domestic businesses by Canadian chartered banks grew by just over 8.5%, hitting $230 billion.

That’s a collective commercial loan book that’s more than 20% higher than when I starting tracking these Bank of Canada stats in December 2008 (The category is “Business loans to Canadian residents for business purposes”):

December 2008: $191.563 billion
January 2009: $185.679 billion
February: $183.759 billion
March: $184.089 billion
April: $181.811 billion
May: $178.691 billion
June: $176.365 billion
July: $174.664 billion
August: $173.818 billion
September: $171.152 billion
October: $171.091 billion
November: $168.425 billion
December: $169.430 billion

January 2010: $167.892 billion
February: $168.104 billion
March: $169.495 billion
April: $169.163 billion
May: $166.378 billion
June: $165.369 billion
July: $166.988 billion
August: $164.774 billion
September: $163.976 billion
October: $168.401 billion
November: $168.892 billion
December: $169.170 billion

January 2011: $170.42 billion
February: $171.800 billion
March: $174.028 billion
April: $175.198 billion
May: $173.974 billion
June: $176.527 billion
July: $177.574 billion
August: $177.654 billion
September: $176.856 billion
October: $178.214 billion
November: $176.705 billion
December: $180.526 billion

January 2012: $180.5 billion
February: $182.7 billion
March: $185.3 billion
April: $188.0 billion
May: $186.6 billion
June: $187.9 billion
July: $190.9 billion
August: $192.6 billion
September: $195.0 billion
October: $197.2 billion
November: $198.1 billion
December: $201.5 billion

January 2013: $200.8 billion
February: $204.8 billion
March: $209.1 billion
April: $210.0 billion
May: $209.2 billion
June: $212.5 billion
July: $216.6 billion
August: $215.3 billion
September: $217.8 billion
October: $218.7 billion
November: $219.5 billion
December: $220.6 billion

January 2014: $219.2 billion
February: $218.4 billion
March: $223.3 billion
April: $229.4 billion
May: $231.7 billion
June: $230.9 billion

Just think of what this could mean for bank earnings if the Prime rate was to go back to something more normal: like 5% or 6%. And, unlike in the USA (see prior post “Bloomberg: Regulators stand by while U.S. bank lenders get footloose” May 4-14), there’s no hint of weak covenant packages being used to win this business, either.

MRM