business stuff, Dylan Gallagher

US to short Canadian banks

The following article has some interesting points in it about the Canadian real estate market and banks (see http://www.financialpost.com/m/wp/news/fp-street/blog.html?b=business.financialpost.com/2013/05/30/why-its-dangerous-to-short-the-canadian-banks) and their short term future. For those of us who actively work in the market with banks to get individuals and businesses money it has not been easy since the financial crash and seems each day to be getting harder. An associate with Bridge Capital told me yesterday that she can’t believe the turn over of underwriters and how frustrating it is working with them to get deals approved. She attributed the frustration to both the lack of experience of the underwriters but more importantly the lack of flexibility in the guidelines that are used to approve (or decline) deals. To propose that Canadian banks are somehow all of the sudden in a position to experience challenges and a slowdown would seem to be an after thought. Our experience working with banks would suggest any slowdown started years ago with no obvious prospect of change on the horizon. The financial results are simply a lagging indication of what we already intuitively know. Will the slowdown get considerably worse? I am not sure how it can.

As far as the housing market is concerned and the prospects of a crash, I would suggest that Canada has a highly fragmented market and has already been experiencing corrections over the past few years. While a soften of the market is always a prospect I would offer that those in the market are aware of the potential and are acting accordingly.

It will be interesting to watch how the banks continue to perform and hopefully we Canadians will be enabled by our banks not stifled and choked off.

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