Canadians put the brakes on spending – consumer credit growing at slowest pace since the early 1990’s: CIBC

For the first time since 2002 consumer credit in Canada is rising more slowly than in the U.S.

Canadians are putting the brakes on spending with outstanding consumer credit now rising at the slowest pace since the early 1990’s, finds a new report from CIBC World Markets.

“Regardless of how you measure it, there is a clear slowing trend in the pace of growth in household credit,” says Benjamin Tal, Deputy Chief Economist at CIBC and author of the report. “The pace of growth is no longer a reason for the Bank of Canada to move from the sidelines any time soon.

“Households should get credit not only for notably slowing the pace at which they accumulate debt in an environment of historically low interest rates, but also for managing their debt in the most optimal way on record.”

The report notes that on a year-over-year basis, total household credit (consumer credit plus mortgage outstanding) is now rising by just over five per cent — the slowest pace since 2002. The key is the rapid softening in the pace of consumer credit. As of March 2012, overall consumer credit outstanding rose by only 2.3 per cent on a year-over-year basis — the slowest pace since the early 1990s. On a rolling month-over-month basis, consumer credit is now rising by only 0.1 per cent — the slowest pace since 1993.

“The slowing in consumer credit is largely due to the softening performance of the credit cards market,” adds Mr. Tal. “Overall growth in card balances is now marginally in negative territory, with both classic and premier cards showing a similar performance.

“While the dramatic softening in activity during the recession was in part due to supply factors, today’s slowing is driven more by demand considerations, as well as an active shifting of card balances to lines of credit. This trend is very visible in the most recent uptick in activity in the lines of credit portfolio, which we believe is mostly a transfer of balances from the credit card portfolio.”

For the first time since 2002 consumer credit in Canada is rising more slowly than in the U.S. During the highly leveraged period between 2002 and 2008, consumer credit inCanada rose twice as fast as it did in the U.S. After the crisis, growth in U.S. consumer credit actually moved into negative territory, while consumer credit in Canada continued to expand and with U.S. consumer credit now expanding at its pre-recession rate of 4.3 per cent year-over-year.

In addition to a slowing in the growth of consumer debt, the mortgage market is also starting to show some early signs of moderating activity. As of March 2012, mortgage outstanding rose by 6.3 per cent on a year-over-year basis — a rate that is well below the 7.3 per cent average rate of growth seen in the past two years and well below the pace seen during most of the decade.

The softening trend is much more evident in a rolling month-over-month growth rate, which at 0.5 per cent is the slowest since late 2001. The recent modest softening in mortgage activity is coinciding with a reduction in the mortgage arrears rate, which as of January 2012, stood at under 0.4 per cent after reaching close to 0.5 per cent during the recession.

This rate is still double that seen before the recession but is significantly below rates seen in previous recessions. The arrears rate in Alberta is by far the highest in the nation. This reflects the fact that, on average, homeowners in Alberta are younger and less established. As well, the pre-recession period in Alberta had seen activity surging rapidly — leading to a higher percentage of consumers overextending themselves.

“There is no debate about the fact that the housing market is overshooting,” says Mr. Tal. “The only question is what will be the nature of the adjustment. In the absence of a trigger for a violent correction, we do not see such an outcome in the near future. We continue to call for a gradual softening in the market, with prices potentially falling by around 10 per cent in the coming year or two.

“Other factors that will work to soften activity in the market are ongoing changes in the mortgage market with increased scrutiny from regulators regarding risk management practices, as well as the increased use of full-scale appraisals as part of the adjudication process. Accordingly we see mortgage market growth softening gradually to around five per cent year-over-year during the course of the year, down from the current 6.3 per cent rate.”

Interest payments on debt accounted for 7.3 per cent of disposable income in the fourth quarter of 2011, roughly the same ratio seen in the previous two quarters. This relative stability, however, masks two diverging trends; interest payments on mortgage debt is falling, whereas interest payments on consumer credit is rising. Mortgage interest payments as a share of disposable income are at the lowest point since late-2004.

After rising rapidly during the recession, the debt-to-asset ratio has stabilized at 20 per cent in the past two years. With credit softening and asset value rising in the first quarter of the year, we expect to see this ratio improving — a fact that should see the ratio of net worth to disposable income rising in the first quarter. Note that an average household inCanada currently carries a debt load of $102,000 versus an asset position of over$350,000 (of which $250,000 is real estate).

“Looking ahead, it is difficult to get too excited about the consumer’s near-term prospects,” notes Mr. Tal. “With consumer credit growth slowing to a crawl, the housing market leveling off and potentially losing some ground, Canadian consumers will lose two of the main pillars of strength that made them the champion of the recent economic cycle. And while the volatility in the job market statistics will continue to confuse observers, the trend is clear: the pace of job creation in Canada is slowing from 22,000 jobs a month in 2011 to probably around 15,000 in 2012. And the changing composition of employment is likely to work to lower the quality of employment in the country along with the bargaining power of workers — limiting gains in labour income.”

The complete CIBC World Markets report is available at:

CIBC’s wholesale banking business provides a range of integrated credit and capital markets products, investment banking, and merchant banking to clients in key financial markets in North America and around the world. We provide innovative capital solutions and advisory expertise across a wide range of industries as well as top-ranked research for our corporate, government and institutional clients.

For further information:

Benjamin Tal, Deputy Chief Economist, 416-956-3219, or Kevin Dove, Head of External Communications, 416-980-8835,

MEDIA INVITATION – CIBC to celebrate the grand re-opening of Ancaster Branch with a donation to Liberty For Youth

TORONTO, May 24, 2012 /CNW/ – This Saturday, May 26th CIBC (TSX: CM) (NYSE: CM) will celebrate the grand re-opening of the CIBC Ancaster Meadowlands Banking Centre.  The expanded branch will offer clients service and advice in English, Italian and Arabic, six-days-a-week.  To mark the opening, CIBC will present a donation to Liberty For Youth.


WHEN: Saturday, May 26th, 201211:00 a.m. – 3:00 p.m.; ribbon cutting ceremony and donation presentation to Liberty for Youth at 12:00 p.m.
  • Ted McMeekin, MPP Ancaster-Dundas-Flamborough-Westdale
  • Lloyd Ferguson, Councillor Ancaster Ward 12
  • Frederick Dryden, Executive Director, Liberty For Youth
  • Jonathon Dent, Market Vice President, CIBC
WHAT: Draw to win one Napoleon Legend BBQ & Rotisserie
Special time-limited client offers include:
  • 10,000 Aeroplan Miles when you open a CIBC Unlimited® Chequing Account and set up one recurring direct deposit or 3 pre-authorized payments
  • 0.5% bonus interest on CIBC Long-Term GICs
  • Sign-up bonus of up to 100,000 Aeroplan Miles with a CIBC Fixed-Rate Closed Mortgage
ACTIVITIES: Family fun activities including BBQ, caricaturist, clown, balloon artist, stilt walker, cotton candy, midway sports games and much more!
WHERE: CIBC Ancaster Meadowlands Banking Centre
1015 Golf Links Rd.
Ancaster, ON  L9K 1L6



For further information:

Media contact: Geoff Dillon, Senior Director, CIBC, at 416-309-3266,

CIBC Decreases Residential Mortgage Rate by 0.10 per cent for 5 year fixed-rate, closed mortgage

CIBC Decreases Residential Mortgage Rate

TORONTO, May 25, 2012 /CNW/ – CIBC (TSX: CM); (NYSE: CM) today announced the following mortgage rate change, effective May 26, 2012:

5 year Fixed-Rate, Closed Mortgage: 5.34 per cent (decrease of 0.10 per cent)

CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, and has offices in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at

For further information:

Geoff Dillon, CIBC, 416-309-3266,

Canadians Plan to Retire at 63 on Average

According to a recent CIBC poll conducted by Harris/Decima, the average Canadian plans to retire at 63. The poll also shows that as Canadians draw closer to retirement they become less optimistic about achieving their savings goals and believe it more likely they’ll carry some debt into retirement.

As much as 22% of Canadians expect to carry debt into their retirement. But, from past CIBC research the numbers show that 54% of retired Canadians hold some form of debt.

CIBC is using this research to persuade Canadians to save more for their retirement as shown by a statement by Christina Kramer, Executive Vice-President, Retail Distribution and Channel Strategy, CIBC:

“Our CIBC Poll shows that Canadians set out with a vision of building up their savings and eliminating debt to retire at a time of their choosing, but with each passing year they feel less optimistic about their plans,” …”These findings demonstrate the importance of having a plan in place and making progress towards your goals every year, to give you the flexibility to make choices about when and how you retire.”

Although past CIBC polls show that Canadians believe they will be debt free by age 55, many don’t achieve this target. If debt is carried closer to person’s target retirement age of 63, it will restrict the cash flow available for savings and will likely lead to Canadians missing the savings goals they have set for themselves.

“Your finances are all connected, meaning the more effective you are at debt management, the more funds you have available to accelerate savings for retirement,” commented Ms. Kramer. “Sitting down with an advisor to map out a strategy that addresses both your savings and debt management plans is an integral step to achieving your long term savings goals and enjoying the retirement you want.”


Average age at which Canadians expect to retire:

National Average – Age 63
Atlantic Canada – Age 62
Quebec – Age 62
Ontario – Age 63
Manitoba/Saskatchewan – Age 63
Alberta – Age 62
BC – Age 64

Percentage of Canadians, by age, who believe the main reason they will retire is that they will have saved enough money to do so:

Age 18-24 – 50 per cent
Age 25-34 – 43 per cent
Age 35-44 – 37 per cent
Age 45-54 – 35 per cent
Age 55-64 – 21 per cent

Percentage of Canadians by age who expect to carry some debt into their eventual retirement:

Age 18-24 – 13 per cent
Age 25-34 – 15 per cent
Age 35-44 – 24 per cent
Age 45-54 – 26 per cent
Age 55-64 – 31 per cent

Each week, Harris/Decima interviews just over 1000 Canadians through teleVox, the company’s national telephone omnibus survey. These data were gathered in a sample of 1,116 employed Canadians and 683 retired Canadians betweenSeptember 8th and 19th, 2011. A sample of this size has a margin of error of +/-2.9% and 3.7% respectively, 19 times out of 20.

CIBC (CM: TSX;NYSE) is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, and has offices in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at

CIBC Faces Class Action Suit Regarding Mortgage Prepayment Penalty

According to the Siskends LLP website, a class action was commenced in October 2011 against CIBC Mortgages Inc. regarding its practices for calculating prepayment penalties on mortgages entered into across Canada since 2005.

The Statement of Claim alleges that CIBC applied terms and conditions to certain mortgage contracts to allow it unfettered discretion for calculation of mortgage prepayment penalties. It if further alleged that the quantification of prepayment penalties applied by CIBC are in breach of the mortgage contracts.

The action applies to CIBC mortgages as well mortgages through related entities such as Firstline Mortgages and President’s Choice Financial.

Read the press release


Read the Issues Statement of Claim – Ontario

For further information concerning this action, please contact Ruth Noble at 1-800-461-6166 ext. 2381.

CIBC Loses Age Discrimination Lawsuit

On December 29, 2009 CBC (Canadian Broadcasting Corporation) wrote on their website about a 42-year-old banker at Canadian Imperial Bank of Commerce who won a lawsuit claiming his former employer discriminated against him because of his age when he was fired last year.

German-born Achim Beck, a derivatives salesman earing about $1.5 million a year filed the lawsuit against the CIBC in London, England after he dismissed. The CIBC had closed its battered structured products division amidst the credit crisis at the time. Beck claimed he was treated unfairly due to his nationality and age when he was dismissed in May of 2008.

Various media reports indicated that an internal CIBC memo declared the ideal candidate for a subsequent job posting to head the bank’s European derivatives division should have a “younger, entrepreneurial profile” — a stipulation the bank was unable to justify.

The Globe and Mail in its coverage of the event published further details.
– When Beck appealed his dismissal to the bank, alleging it was commonly known that recruiters had already been asked to look for replacements for himself and his colleagues, the CIBC’s Toronto-based head of fixed income sent an e-mail to a couple of people at CIBC World Markets saying: “Further to our discussion this morning I am not sure why we would negotiate any unfair dismissal … as far as I am aware we restructured the IRD sales marketing desk and have not rehired nor do we have any current plans to do so.”
– One of e-mail recipients replied: “Sorry I missed the beginning … did he forget we are rehiring.” To which the head of fixed income replied: “We have no plans to hire I will call u now.”
– CIBC’s legal department sent Mr. Beck a letter saying his role was genuinely redundant, that the bank would not be hiring equivalent employees in the foreseeable future, and laid out criteria that were used to evaluate the marketing team.

The bank faces a significant payout after a British employment tribunal (the London South Employment Tribunal) decided in favour of Beck. The Tribunal found that the bank dismissed Beck and several members of the derivatives team at the time, yet the CIBC had plans to restaff the unit with younger workers. The Tribunal basted senior executives at CIBC for using a “sham” process. It said in its ruling that the e-mail exchange between management “demonstrates a culture amongst senior management of being willing to cover up the true picture.”

Although the Tribunal found in Beck’s favour on age discrimination grounds, it rejected his claim of race discrimination.

In a statement, the bank said it was reviewing the decision and had no comment. The value of the restitution CIBC may be obliged to pay to Beck was to be determined at a later date.

An internet-based search was unable to determine if the CIBC has made payment to Beck and if so how much was paid to him.

Baldo Minaudo
President, MetroActive Lifestyle Network
Senior Consultant, Venturemind Corporation