Canadian lenders have enough capital to withstand losses without needing to raise more cash, Standard & Poor’s said.

“Like all banks elsewhere in the world, Canadian financial institutions are likely to experience additional losses as the recession continues,” the New York-based rating company said Thursday in a statement. “On the positive side, stress tests reveal that these banks have sufficient capital to withstand losses in what we believe is the likeliest case.”

Lenders including Royal Bank of Canada, Toronto-Dominion Bank and Bank of Nova Scotia exceed the minimum capital thresholds that S&P identified as necessary to cover losses, the company said. The tests also included credit unions in British Columbia and Quebec, and HSBC Canada.

More..

“I guess boring is cool and Canada is cool,” said Jim Little, chief brand officer with Royal Bank of Canada, explaining the bank’s decision to play up its nationality in an ad campaign aimed at U.S. and British capital markets.

A few months ago, you might never have known Canada’s No. 1 and 2 banks, Royal Bank and Toronto-Dominion Bank, were big players in global banking.

Canada’s success in emerging nearly unscathed from the financial crisis changed all that. Caution has a new cachet, and the nation’s bankers are embracing their inner maple leaf.

“We were always worrying about how we’d be seen, because when we’re in the United States, we act like Americans,” said TD Bank chief executive officer Ed Clark, whose U.S. retail operation has been marketed as “America’s most convenient bank.”

“Now it’s actually a positive to say, yes, we happened to be owned by a Canadian bank.”

It was perhaps U.S. President Barack Obama who opened the door to Canadian banking bravado when he hailed the nation’s sound banking system back in February. The compliment followed the World Economic Forum’s ranking of Canada’s banking system as the world’s soundest.

Before long, marketing executives at the big banks noticed a newfound interest in Canada’s conservative credentials among capital markets and investment banking clients.

More..

U.S. President Barack Obama has heaped praise on the management of this country’s financial system. Ireland is considering overhauling its system to look more like Canada’s. Financial papers around the world are running headlines such as “Canada banks prove envy of the world.”

Since the credit crunch began in the summer of 2007, the Big Five banks have booked a total of $18.9-billion in profits.

Royal Bank of Canada

TD Bank

Bank of Nova Scotia

CIBC

Bank of Montreal

Whether measured by market value, balance sheet strength or profitability, Canada’s banks are rising to the top. Since the credit crunch began in the summer of 2007, the Big Five banks have booked a total of $18.9-billion in profits.

In roughly the same period, the five biggest U.S. banks have lost more than $37-billion (U.S.). One, Wachovia Corp., was forced to sell out to avoid failing. Another, Citigroup Inc., long the world’s largest bank, may have to be nationalized and this week became a penny stock. The picture is similar in Britain.

The U.S. has spent most of the $700-billion the government earmarked for bank bailouts, and there are estimates that the final tally could be more in the trillions of dollars. The head of the Bank of England said last month that it’s “impossible” to know how much money it will take to fix his country’s banks.

Canada, by contrast, has not had to inject capital directly into banks, other than starting a program to buy from banks $125-billion (Canadian) of insured mortgages – any losses from which the government was already on the hook for anyway.

The reason comes down to a fundamental conservatism. From lending practices to bets on trading to financial reserves and takeovers, the Big Five banks have long tended to be more careful than their global peers. And when they did want to get aggressive, government and regulators held them in check.

“The Canadian banks were under a significant amount of pressure from both the analysts and the marketplace in general to be more aggressive in expanding into international markets, particularly the United States, and I think to some degree resisted partially because of a more conservative approach,” says RBC chief executive officer Gordon Nixon.

Still, the industry has had stumbles, most notably Canadian Imperial Bank of Commerce’s misadventure in derivatives, which led to a $2.1-billion loss for 2008.

And shareholders in Canadian banks have been battered. As a group, the banks’ shares are down almost 50 per cent since Aug. 1, 2007, with most of the decline in the past six months as the economy worsened.

The concern weighing on these bank shares, for starters, is that profit growth in general is a thing of the past until the economy picks up. Most analysts say the banks’ profits will shrink in coming quarters as more loans go sour and margins on lending tighten up. There’s also nagging doubts that dividend payments are unsustainable and that something bad is still lurking on balance sheets.

More writedowns are likely in store for banks such as Toronto-Dominion Bank and Royal Bank of Canada, both of which made big acquisitions in recent years that now look overpriced.

Still, bank bosses such as Rick Waugh, CEO of Bank of Nova Scotia, say the banks are insulated from lingering problems because they have profits rolling in from many sources.

“We have made mistakes,” he says, “but we made sure that we were well diversified.”

That’s a result of a conservatism not just among executives. That same approach extends to consumers, helping the banks sail along on the strength of their domestic lending businesses.

More..