It remains "satisfied with the resiliency" of its portfolio
While the vast majority of borrowers at Royal Bank of Canada who took advantage of the bank’s mortgage deferral options have already resumed their payments without incident, the institution reported that a fraction of its deferrals have turned delinquent.
In its latest earnings call, the bank said that as of the end of October, nearly 90% of deferrals offered through the bank’s client relief program have expired.
Of these deferrals, around 2% have become delinquent, “of which a third were delinquent prior to the deferral being put in place,” said Graeme Hepworth, chief risk officer at RBC. “This has resulted in a slight uptick in early stage delinquencies from the Q3 lows.”
The bank’s remaining active deferrals totalled $6.3 billion, accounting for a shade under 2% of RBC’s Canadian banking portfolio. Nearly all of these active deferrals are from the lender’s residential mortgage portfolio, including HELOCs.
According to a separate Better Dwelling analysis of the RBC figures, the bank has seen $45.7 billion in mortgage and HELOC payment deferrals expire. Of the $14.3 billion in insured mortgages with expired deferrals, 2.3% became delinquent.
“Insured mortgages are typically high-ratio ones, which mean smaller down payments. In other words, this demographic is likely young homebuyers,” Better Dwelling said.
On the other hand, uninsured mortgages and HELOCs, which accounted for the remaining $31.4 billion of the balance of expired deferrals, saw just 1.6% of their volume turn delinquent.
RBC is anticipating an increase in delinquencies and impairments over the next few quarters, although it also said it is “adequately reserved” to weather these pressures.
“We are satisfied with the resiliency of our high-quality, diversified portfolio, which has benefited from our strong risk-aware culture and disciplined approach to underwriting, which remains focused on effective lending structures and solid risk return profiles,” Hepworth said.
