Canadian Banks Thrive Amid Red-Hot Housing Market

Share This Article
February 27, 2017 10:04am NYSE:EWC

canada-flag

Canadian banks have been perhaps the biggest beneficiary of the country’s massive housing boom, with the financial giants taking on more and more debt in order to meet surging mortgage demand.


As Bloomberg notes, the banks have increased their leverage substantially over the past several years, with the debt going mostly toward offering more residential mortgages:

The nation’s lenders have more than doubled their external debt since the end of the recession — an amount in excess of C$500 billion ($382 billion), according to international investment position data released by Statistics Canada.

That’s brought total external debt financing of Canadian banks to about C$850 billion through last September, and it’s easy to conclude that at least some of the new foreign debt has helped drive mortgage lending. In some cases, the linkage with residential mortgages is direct.

Much of the mortgage demand is coming from foreign buyers as well, with “an increasing amount of the debt seems to be short-term and denominated in foreign currencies,” according to Bloomberg. That could make banks vulnerable to currency shocks, if, for example, the U.S. dollar surges value.

But for now, the party rolls on — as do the gains for Canadian stocks and the funds that hold them.

The iShares MSCI Canada Index ETF (NYSE:EWC), which offers significant Canadian banking exposure, was trading at $27.15 per share on Monday morning, down $0.07 (-0.26%). Year-to-date, EWC has gained 3.82%, versus a 5.81% rise in the benchmark S&P 500 index during the same period.

EWC currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 5 ETFs in the Canada Equities ETFs category.


Read Next


Get Free Updates

Join over 50,000 investors who get the latest news from ETFDailyNews.com!

Most Popular


From Our Partners


Explore More from ETFDailyNews.com

Free Daily Newsletter

Get daily ETF insights from our market experts. Never miss another important market development again!

ETFDailyNews.com respects your privacy.

Best ETFs

We've rated and ranked nearly 2,000 ETFs and ETNs using our proprietary SMART Grade system.

View Top Rated ETFs

Best Categories

We've ranked dozens of ETF categories based on relative performance.

Best ETF Categories