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Trucking Loans Hit Record High Amid Freight Downturn
6 Dec
Summary
- BMO's gross impaired loans in transportation reached a new peak of CA$585 million.
- The transportation sector saw a 38% increase in impaired loans last quarter.
- A three-year freight recession challenges trucking companies' loan repayment abilities.
Gross impaired loans within BMO's transportation portfolio have reached a new peak, totaling CA$585 million for the most recent quarter. This figure represents a significant worsening of conditions, following a temporary relief in the prior quarter. The transportation sector, in particular, experienced a substantial 38% increase in these troubled loans.
This rise in impaired loans indicates growing difficulties for customers in repaying their debts, highlighting broader health concerns within the trucking industry. The prolonged freight recession, now in its third year, has created a challenging environment for trucking companies, many of whom acquired equipment when spot rates were exceptionally high.
Despite current economic headwinds, BMO's Chief Risk Officer noted a steady decline in new watch list formations, projecting a future decrease in impaired balances. The bank anticipates a softer economic environment in Canada during the first half of next year, with expectations for stronger growth later in the year, alongside an improved economic backdrop in the U.S.
