RBC braces for possibly prolonged low oil prices
Will be retesting energy-related loans at $45 a barrel.
TORONTO — The chief executive of Royal Bank of Canada says the lender will begin testing its $9.6-billion portfolio of energy-related loans to see how it will perform if oil prices remain around $45 a barrel for a prolonged period.
Dave McKay says the bank has already tested how the portfolio would fare if oil prices hovered around $60 per barrel and is comfortable with the results.
But, given the continued drop in oil prices, the bank will be retesting for $45 a barrel, McKay told a conference of Canadian bank CEOs on Jan. 14.
The bank is also keeping a close eye on its portfolio of consumer loans in Alberta, including credit cards and mortgages, which could be at risk if the oil price decline leads to job losses in Western Canada.
However, the bank expects to reap some benefits from the lower oil price, as well. McKay says RBC’s commercial lending business in Ontario should see higher revenues, as the weaker loonie boosts exports to the US and leads to growth in that part of the country.
The bank also expects lower oil prices will boost economic conditions in the Caribbean – a region that is a net importer of oil – and will aid RBC’s businesses there.
© 2015 The Canadian Press