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Canadian banks will come under increased pressure as revenues from key businesses such as consumer lending and capital markets start to decline over coming quarters, Fitch Ratings warned on Monday.

The rating agency said it expects high consumer debt levels, primarily from mortgage borrowing combined with broad-based margin pressure, to weigh heavily on big banks’ financial results going forward.

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We expect retail loan growth to decelerate in the second half of 2012 as the housing market cools

“We expect retail loan growth to decelerate in the second half of 2012 as the housing market cools and new regulations aimed at curbing residential lending take effect,” Fitch said.

“Given the sheer size of the consumer loan book on Canadian banks’ balance sheet, continued earnings improvement in commercial lending may not offset the slowdown on the retail side. Furthermore, earnings from capital markets and wealth management activities are expected to trend downward as heightened global uncertainty, mostly related to Europe, started eroding investor confidence in April.”