BMO CEO says Canada's economic growth 'moderating', but 'no screeching halt'
The BMO Bank of Montreal logo is seen on the BMO Nova Centre, housing their Atlantic Canadian headquarters and support services, in Halifax on Tuesday, April 2, 2019. THE CANADIAN PRESS/Andrew Vaughan
Armina Ligaya, The Canadian Press
Published Tuesday, April 2, 2019 1:27PM EDT
TORONTO -- Bank of Montreal's chief executive Darryl White says economic growth in Canada is "moderating" but it's "no screeching halt" and the risk of a recession in the coming year is relatively low.
White said Tuesday that he estimates that by the back end of this year, the country's GDP growth will be in the range of 1.5 per cent.
"Are we experiencing some slowdown? Yes, but let's pay attention to the rate of change... It's moderating, it's not a screeching halt," he told reporters after BMO's annual meeting of shareholders.
"And when we look at employment rates, we look at inflation, they don't line us up to driving ourselves towards a recession."
White's comments come after an analyst and short sellers recently heeded caution about the Canadian banking sector.
Veritas analyst Nigel D'Souza said in late March that the Big Six banks' latest quarterly earnings were "underwhelming" and cautioned that the sector is likely facing an "inflection point" in the credit cycle. He said investors should reduce exposure ahead of "an acceleration of credit losses."
As well, Steve Eisman, a senior portfolio manager at Neuberger Berman in New York, who was featured in the book and film The Big Short, recently reiterated his bet against the big Canadian banks, pointing towards the real estate sector.
On Tuesday, White told shareholders and other annual meeting attendees that while BMO has seen some moderation in Canadian consumer loans and mortgages, this was both "healthy and expected" and credit quality continues to be "very good" in these consumer portfolios.
He added in his speech that BMO remains confident in its medium-term target of earnings-per-share growth of seven to 10 per cent.
While the performance of each housing market in Canada varies, there continues to be net growth, White told reporters.
He said British Columbia, Saskatchewan and Alberta are seeing some weakness, while Toronto's market is "steadying" and the markets in Southern Ontario outside of Toronto, along with Ottawa and Montreal, are strong.
"You really have a diverse set of circumstances when you go across the country... On a blended basis across Canada, are we going to see a slowing consumer mortgage portfolio? For sure, relative to what we would have seen last year or the year before. But still growing," White told reporters.
In response to the growing rhetoric targeting Canadian banks and the real estate sector, White noted that BMO's mortgage book is 44 per cent insured, and the uninsured portion has a more than 50 per cent loan-to-value ratio. And, among its peer group, BMO has the lowest exposure to the Canadian housing market, he added.
"I don't lose sleep over this question, personally... I think the market is a lot healthier than some people think it is."