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Canadian banking stocks were left out in the cold on Thursday after Moody’s downgraded the long term ratings of six of the country’s largest lenders.

Moody’s lowered its view on Toronto-Dominion Bank, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada and the Royal Bank of Canada all down by a notch late on Wednesday, with its analysts citing concerns over growing consumer debt levels and high housing prices as the reason behind the move.

“Today’s downgrade of the Canadian banks reflects our ongoing concerns that expanding levels of private-sector debt could weaken asset quality in the future,” said David Beattie, a senior vice president at Moody’s. Continued growth in Canadian consumer debt and elevated housing prices leaves consumers, and Canadian banks, more vulnerable to downside risks facing the Canadian economy than in the past.”

The downgrade – the first in more than four years – sent shares in the six banks down between 0.7 to 2.1 per cent – as a lower rating could increase the cost of borrowing for the companies in question.

At pixel time:

  • Toronto-Dominion Bank: -0.8 per cent
  • Bank of Montreal: -1.1 per cent
  • Bank of Nova Scotia: -1 per cent
  • Canadian Imperial Bank of Commerce: – 1.2 per cent
  • National Bank of Canada: -2.1 per cent
  • Royal Bank of Canada: -0.7 per cent

The TSX financial index was not the day’s worst performing sector however. Its 0.8 per cent decline was pipped by losses in the consumer staple sector (down 0.83 per cent) and the energy sector (down 1.2 per cent).

Copyright The Financial Times Limited 2018. All rights reserved.

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