The Bank of Nova Scotia this morning kicked off a week of earnings from Canada’s biggest lenders. As the banks aim to turn a corner on slow loan growth, an increasing number of Canadians are still struggling to pay down credit cards they maxed out to afford the recent spike in living costs. (If reading about this gives you anxiety, please know: The credit counselling expert I spoke with says you’re not alone. It’s been a tough few years.) More on that below, but first:

The CEO of Rogers got grilled by a federal government committee over a price increase for TV customers in fixed contracts.

Investor Moez Kassam has donated $15-million to SickKids, where his daughter received life-saving care.

Accenture was given too much control over $313-million in sole-source contracts from Ottawa, the federal auditor general has found.

• U.S. markets will be watching the job openings and labour turnover survey (JOLTs) for November. This release and non-farm payrolls on Friday could help guide the Federal Reserve’s next rate decision on Dec. 18.
• Domestic earnings include the Bank of Nova Scotia and Waterloo-based Descartes Systems Group. In the U.S., Salesforce Inc. and semiconductor giant Marvell Technology, Inc. are on tap.

Lower borrowing costs, a falling unemployment rate and a flood of Canadians coming off the real-estate sidelines are expected to make for a more profitable 2025 for the Big Six banks. Beneath the surface, however, millions of newcomers and a growing segment of middle-income earners are feeling a credit crunch.

As Canada’s biggest lenders report this week, some analysts are expecting higher impaired loans – debt that a bank believes will not be repaid – as delinquencies among retail customers rise.

• Those provisions are a closely watched measure of financial stress among the banks’ customers, banking reporter Stefanie Marotta writes.

The signs of credit strain are already showing in missed payments, increased insolvency levels and a rise in the number of consumers seeking financial help, experts and analysts say.

More than 1.3 million consumers missed a credit payment in the third quarter of 2024, up 10.6 per cent over the same period last year, a new report from Equifax Canada shows. The largest rise in missed payments over that period was among newcomers, whose numbers grew to 4.54 per cent from 3.5 per cent.

Rebecca Oakes, vice-president of advanced analytics at the credit agency, said newcomers who arrived during the peak of Canada’s immigration levels in 2021 and 2022 have been hit hard by heightened inflation, interest rates and unemployment – on top of the usual hurdles they face accessing credit and navigating the country’s financial system.

“We specifically call out credit to newcomers to Canada in our report as being one group where we are still seeing some sustained financial stress,” said Oakes, who noted that new Canadians have traditionally shown strong credit performance. “Unfortunately, we’re seeing missed payments coming through faster than we have before. And so we’re seeing a higher delinquency or a more severe delinquency.”

Meeting in the middle

But it isn’t just new Canadians facing the strain, Oakes said. The number of homeowners who paid their credit balances in full dropped significantly as lending rates were elevated. That number appears to be levelling off as interest rates fall – but not for everyone.

About two-thirds of credit-card debt is paid in full each month, Oakes said. But for the other third, “the average balance is increasing, and we’re seeing payments fall.” A large portion of those consumers are in regions with higher shelter costs.

“We have seen homeowners in particular in Ontario and B.C. where mortgage levels are higher – they were more impacted by the high interest rates. And we saw in that population a faster increase in missed payments.”

Anne Arbour, director of partnerships and education at the non-profit Credit Counselling Society, said her organization is hearing from “middle-income earners who were able to manage prior, struggling more than they used to.” When consumers call for help, they cite runaway credit-card debt and upcoming hikes to their mortgage payments as major pressures.

“The phone is ringing,” she said. “And what we’re hearing from people when the phone is ringing are many pain points,” which are shared across demographics.

“Our clients are not just low income,” Arbour said. “We’ve got bankers. We’ve got lawyers.”

The squeeze is also playing out in Canada’s personal insolvency rate, which is 9.8 per cent higher than in 2019, according to a report this week by Alberta Central, the province’s central agency for credit unions. The country’s levels of consumer insolvency, which includes both bankruptcies and debt renegotiations, also showed a year-over-year jump of about 14 per cent this past October.

A silver lining?

Charles St-Arnaud, Alberta Central’s chief economist, said the vast majority of those insolvencies were debt proposals, which are a “win-win.”

“The borrower is happy because they got some relief from the lender, so he doesn’t have to default on his loan. And the lender, it’s happy it has a borrower that’s not defaulting.”

Consumers in credit distress are finding banks are increasingly open to new terms, St-Arnaud said. Especially if the banks say: “Well, you still have income – we’ll just lower your payments and you’ll pay for longer.”

That option should remain open to some consumers, barring “negative economic shocks” outside of Canada that could disrupt the labour market, he said. And Arbour, at the Credit Counselling Society, said the growing number of calls for help is “wonderful,” because it shows people are reaching out for help – even if talking openly about debt remains taboo.

“People are much more apt and willing to talk about personal or mental-health challenges than they are about their finances,” she said. “So, if I’m at a party, people will tell me their mental-health diagnosis without much prodding, but they’re sure as heck not going to show me their Visa bill.”