According to a new report by Equifax Canada, the national 90-day non-mortgage delinquency rate rose to 1.12% in the first quarter of 2019. Further deterioration of loan book quality of Canadian banks can lead to a rise in risk-weighted assets, and consequently a reduction in capital ratios. This will in turn put pressure on dividend payout as banks will need to retain capital to meet regulatory requirements.
We believe that Toronto-Dominion Bank (TD) and VersaBank (OTC: VRRKF) are relatively safe from adverse movements in asset quality compared to peers because of