Canadian Bank Lending Down Fifth Month in a Row

This isn’t the first time that we’ve dug into the numbers, only to find that Canada’s banks really have pulled back on the throttle of commercial lending (see prior post “Bank lending drops again in February” March 20-09). With May’s figures out, following a revised number for April, the stats aren’t pretty.

The category is “Business loans to Canadian residents for business purposes”, and the data is from the Bank of Canada:

December: $191.967 billion
January: $186.086 billion
February: $184.168 billion
March: $184.5 billion
April: $182.228 billion
May: $180.619 billion

May 2009’s figure is now approaching the number not seen since November 2007. And these numbers include the massive loans that went out the door to Teck for the Fording purchase last Fall (see prior post “Could it be that the Banks and Flaherty are both right? part 2” January 9-09); the ones that have juiced these business loan figures higher then they really are.

A 5% drop in drawn business credit in the space of 5 months.

Do you think that’s at all connected to the fact that some Canadian bank stocks are up almost 60% over the past six months? Or is it the other way around?

Better still, what’s a $100 million line of credit program from the Business Development Bank of Canada (only for “strong balance sheets”) going to do in the face of a 5 month, $12 billion withdrawal from the system? By the time the program is up-and-running, loans will have been reduced by another few billion dollars.

The free market is doin’ its thing, and there is nothing anyone can do to stop it.