DBRS says Canadian banks face greater risk from home prices

Ratings bureau DBRS has given Canada’s largest banks a generally positive outlook but is warning of increased risk from rising home prices.

The outlook for 2018 calls for continued growth for the banks due to their diversified business models, expanding franchises and “generally favourable” economic conditions.

However, among the growing risks that could hamper growth, DBRS highlights “elevated home prices and highly leveraged consumers.”

The high levels of household debt could amplify any shocks from employment or interest rate shocks the report says.

DBRS says that there could be external factors that also weigh on Canada’s largest banks’ growth including global geopolitics, trade disruptions, and rising interest rates.

The report concludes that the banks are “well positioned to absorb a higher level of credit losses” and expects their ratings to remain stable or improve in the coming months.

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