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  5. BNS: Can you comment on how much exposure the Canadian banks have to commercial real estate in the US and Canada? [Bank of Nova Scotia (The)]
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Q: Can you comment on how much exposure the Canadian banks have to commercial real estate in the US and Canada? It sounds like office towers are of particular concern. Could you also comment on residential mortgage risks. And how much impact it could have on the stock prices.
Thanks.
Asked by Brian on May 12, 2023
5i Research Answer:

BMO, TD and NA have about 10% commercial exposure. RY has about 20%. Other banks' data is less clear. Residential mortgage exposure is by far a bigger portion of assets for all Canadian banks. There is risk in a housing collapse, and variable rates are pressuring mortgage holders. However, the situation is different than 2008 because of the abundance of jobs available. Most people will keep paying their mortgage if they have a job. In the financial crisis, people did not have jobs so just walked away from their houses. Some recession concern is in banks' stock valuations already.  In a recession, we might expect bank stocks to drop perhaps 5% to 8% but this of course is a difficult thing to focus.