TORONTO - Canadian banks are expected to set aside money for challenging days, which will hurt quarterly earnings, as investors await commentary on how the lenders will navigate a prolonged high interest-rate environment that has dented credit growth.
The high interest-rate environment has pressured consumers as they cope with higher mortgage and credit card repayments, in an already-inflationary landscape. Net interest income, or the difference between what lenders earn on loans and pay out for deposits, is expected to increase in a range between 0.2% and 4%, but the banks are setting aside more loan-loss provisions than last year.In April, the Bank of Canada kept its key interest rate unchanged at a near 23-year high of 5% but the bank's head said a cut in June was possible if a recent cooling trend in inflation is sustained. Money markets are factoring in a 25 basis-point cut in June.
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