No more defaults due to rates, says the head of the National Bank

No more defaults due to rates, says the head of the National Bank

Mr. Ferreira stated that the Montreal Financial Corporation had registered small There was an increase in defaults for variable-rate mortgages, but this percentage was lower than what was observed for pre-pandemic fixed-rate and threshold mortgages.

Overall, when we look at the performance of our loan portfolio and our customers’ ability to handle higher rates, it’s very good.And he confirmed, on Monday, during an exchange with the banking sector analyst at RBC Capital Markets, Darko Mihlik.

When asked about this issue, Mr. Ferreira indicated that the size of bank deposits indicates the survival of family finance strongDespite the pressures of rising interest rates and the rising cost of living.

He noted that nearly a third of all mortgage borrowers have raised their mortgage payments in 2022, and that 80% of them have a variable rate.

If you look at this group, they still have more cash than they did before the pandemic. Now it comes to the first payments “at higher rates”. Will it erode over time? Obviously, but they’ll be able to keep up the pace. »

Quote from Laurent Ferreira, President and CEO of the National Bank

The banker noted that 10% of the fixed-rate mortgage portfolio is due within the next 12 months and that a good share of customers who will rollover have a loan with an amortization period of less than 25 years.

loyal customers?

Rania Llewellyn, President and CEO of Laurentian Bank, who also attended the event, said she was not worried that higher interest rates would hurt customer retention.

More than half of the bank’s customers have only one product. This data represents an opportunity for cross-selling of other products and services, but it may also represent a risk in the market as customers tend to shop more actively for their mortgage rates.

In response to a question about the subject, the leader indicated that nearly 80% of the bank’s mortgage loans are at a fixed interest rate. Of this batch, only about 70% will be renewed in 2025. For us, that’s a low turnover risk.

Laurentian Bank has posted a file loyalty team Who contacts customers and introduces them to new products. Ms. Llewellyn believes that this team’s efforts will help retain customers and increase the number of products and services they have with Laurentian.

For business loans, the director believes Laurentian stands out on fronts other than price. We are very clear. Our customers know it: we don’t compete on price, but on service, and this is reflected in customer satisfaction.

She confirmed that she expects the rise in interest rates to allow the financial institution to increase its revenues and interest margins.

In an uncertain economic environment, Ms. Llewellyn acknowledged that Laurentian Bank was taking a more cautious approach to capital reserves.

Laurentian must maintain a minimum capital reserve of 7%, but management is aiming for an even higher threshold of 8.5%. At the end of the year, that percentage had increased to about 9%. At this time, Mrs. Llewellyn does not plan to publish this excess capital.

Given the weak economic outlook, I said publicly in September that although our target is 8.5%, we feel more comfortable around 9% and that’s the commitment we’ve taken from investors.

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