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“Our results this quarter are markedly better than in the first two quarters of the year, largely due to moderating expected credit losses,” said Linda Seymour, president and CEO of HSBC Bank Canada, in a press release. “This is in line with improved forward-looking economic guidance, even after factoring in the resurgence of the pandemic that is now upon us.”
Still, the second wave of COVID-19 looks to have at least slowed Canada’s economic recovery, and prompted some provinces to reimpose restrictions on businesses and gatherings. Those restrictions could weigh on borrowers.
Home Capital said its allowance for credit losses was determined as of Sept. 30, and that it was based on the forecasts available at that time. Those forecasts remain a moving target, with Home Capital’s chief financial officer, Brad Kotush, noting the “forward-looking nature” of accounting standards will create volatility in PCLs from quarter to quarter.
“Changes in economic conditions during 2020 have provided an example of that volatility,” Kotush added.
More volatility could be on the way, as the second wave of COVID-19 has arrived with governments aiming to reduce or alter the support they’ve provided people and businesses. It has also arrived as loan-payment deferrals that lenders granted during the first wave have ended or are close to ending.
In line with improved forward-looking economic guidance, even after factoring in the resurgence of the pandemic
HSBC Bank Canada
Home Capital, for instance, said residential mortgage and other loan deferrals stood at 335 loans with a balance of $146.1 million as of the end of October, down from 2,698 loans with a balance of nearly $1.3 billion at the end of July. More than 95 per cent of the loans on the lender’s balance sheet that were previously granted payment deferrals are being repaid, and it is no longer accepting deferral requests from customers not already in the program, it said.
