TORONTO (Reuters) – The coronavirus pandemic’s economic impact on Canada will be broader and more challenging than the 2008-09 financial crisis, with the recovery likely to take longer than expected, chief executives of the country’s two major banks said on Wednesday.
“This is much more severe than the financial crisis … which was really mild for Canada,” Royal Bank of Canada <RY.TO> Chief Executive Dave McKay said on a media call following its annual shareholder meeting.
“We’re facing an economic shock and contagion like we’ve never seen,” he said, adding “significant” fiscal stimulus will help ease the impact.
Canada has announced a massive stimulus package to support the economy during the health crisis, and the central bank has cut the key interest rates to a decade low.
McKay said other measures were being considered, “elements where we see holes,” including consumer credit programs, and programs for banks to help corporations separately from the government’s current fiscal package.
While the government assistance measures may appear to be taking longer than ideal, they have come together, “very, very quickly,” given the unprecedented nature of the crisis, Victor Dodig, CEO of Canadian Imperial Bank of Commerce <CM.TO>, said in an interview following its investor meeting.
Both CEOs said they expect a slow recovery, as consumers and businesses make permanent changes to the ways they operate, fueled by wariness about future spikes in COVID-19 cases and the effect of the recession on consumers and businesses.
“We’re going to have to support businesses and consumers a little bit longer than we might have planned, even a month ago,” McKay said.
Both said predicted V- or U-shaped swift recoveries were unlikely.
“When things start looking more normal, people will feel like their wealth is diminished,” Dodig said. “People are going to be cautious overall … that is going to have a drag on the economy.”
Both banks said they have sufficient capital and liquidity to weather the crisis, and currently have no plans to change their dividend policies.
RBC had a common equity tier 1 (CET1) ratio, the measure of a bank’s capital strength, of 12% of risk-weighted assets in the first quarter, when the pandemic’s impact was still limited. CIBC’s stood at 11.3%.
The minimum CET1 requirement for major Canadian banks is 9%, reduced by the banking regulator last month to increase lending capacity as the coronavirus outbreak’s toll grew.
RBC has processed 250,000 payment deferrals for mortgages and other loans for struggling customers, while CIBC has received 250,000 deferral requests.
RBC shares closed up 2% in Toronto, while CIBC shares rose 2.3% in line with the Toronto stock benchmark <.GSPTSE>.
($1 = 1.4045 Canadian dollars)
(Reporting By Nichola Saminather; Editing by Denny Thomas, Chizu Nomiyama, Bill Berkrot and Steve Orlofsky)