The moves bring the total bad loan provisions set aside by Canada’s Big Six to $10.93 billion
Two of Canada’s largest banks have set aside record amounts in provisions for bad loans after suffering huge drops in earnings in the second quarter of 2020.
Toronto-Dominion Bank (TD Bank) announced that they have set aside $3.22 billion for sour loans – the largest reported provision among Canada’s biggest lenders and five times the $633 million the bank earmarked for the second quarter of 2019 – after experiencing a quarterly earnings drop of 52% to $1.5 billion compared to the same quarter last year.
Meanwhile, Canadian Imperial Bank of Commerce (CIBC) earmarked $1.41 billion for bad loans after experiencing a 71% drop in net income to $392 million compared to Q2 of 2019.
Read more: Most of Big Six's Q2 profits could be wiped out – analysts
The announcement by the two banks brought the total bad loan provisions set aside by the Big Six to $10.93 billion as the lending sector prepares to deal with the economic fallout caused by the COVID-19 pandemic.
“What we’re living through here is an unprecedented shutdown of large segments of the economy, which is impacting consumers and businesses and customer activity in unprecedented ways,” Riaz Ahmed, chief financial officer of TD Bank, told Bloomberg in an interview. “We’ve looked at our provisions and applied a good measure of prudence to make sure that we are prepared to weather this pandemic.”
Meanwhile, Victor Dodig, president and CEO of CIBC, said that the bank’s capital position “remains strong, giving us flexibility and resilience as we navigate the current environment and continue to advance our long-term client-focused strategy.”
“This will enable us to further diversify revenue streams, deepen client relationships and improve our efficiency as we continue to deliver value to our shareholders.”
