CIBC Warns Of Rising Risks Due To High Debt Levels And Joblessness

Canadian Imperial Bank of Commerce (TSX:CM) is raising concerns about the “toxic” combination of rising debt levels and joblessness in Canada.

The head of domestic banking at CIBC says elevated household debt combined with a surge in unemployment risks putting Canada in a precarious position during the current coronavirus shutdown.

“We have a highly indebted Canadian consumer that we’ve been talking about for quite some time, and just under half of Canadians live paycheque to paycheque,” said Laura Dottori-Attanasio, who oversees Canadian personal and business banking at CIBC. “If you add that people are no longer working and generating cash flow, I do think it makes for a toxic combination that’s going to be much more difficult to overcome the longer this takes to resolve.”

Dottori-Attanasio said she’s concerned about a buildup of stress among consumers that will only get worse until there’s clarity on when the pandemic ends and plans for a recovery begin to take shape. She spent almost seven years as chief risk officer before moving to her current role on March 2, putting her in charge of CIBC’s largest division just as the coronavirus pandemic began disrupting the Canadian economy.

Since mid-March, 5.97 million Canadians have applied for the federal government’s emergency income-support program for people who have lost income due to the pandemic, a government official said last week. At the same time, CIBC has provided more than 250,000 clients with deferrals for $20 billion in mortgages, credit cards, loans and credit lines during the pandemic, said Dottori-Attanasio. CIBC has also approved $1.5 billion of government-backed loans for 40,000 small-business clients under the federal government’s Canada Emergency Business Account program.

Canadian households already owe $1.76 for every dollar in disposable income, one of the highest ratios among advanced countries.