Canadian banks' losses on credit cards may be easing amid signs that the economy is improving, according to Canadian Imperial Bank of Commerce.
The Toronto financial company said Tuesday that it thinks unemployment rates may soon decline, leading to gains in its cards portfolio.
"If Canadian unemployment has or does peak shortly and starts to decline and at the same time the economy performs reasonably, the probability that these portfolios will grow and you'll see a drop-off in loss rates is significant," Gerald McCaughey. CIBC's president and chief executive, said at a conference in Montreal hosted by the banking company.
CIBC said last month that it had set aside $511 million to cover bad loans in its third quarter, the largest amount since 2000, as increasing numbers of consumers defaulted on credit cards and businesses failed to make loan payments amid the recession.
CIBC is Canada's fifth-biggest bank and its largest credit card issuer.
"If you take a loss rate that is where it is today and go back to historic levels, the impact on the industry from a viewpoint of increased profitability due to lower loan losses would be significant," McCaughey said.