The Canadian economy will suffer a bigger hit from the coronavirus pandemic than the 2008-09 financial crisis, with a recovery likely to take longer than expected, but "significant" fiscal stimulus will help ease the impact, Royal Bank of Canada's chief executive said on Wednesday.
"This is much more severe than the financial crisis ... which was really mild for Canada," Dave McKay said on a media call following the lender's annual shareholder meeting.
"We’re facing an economic shock and contagion like we’ve never seen," he added.
McKay said RBC's earnings did not fall off much during the financial crisis.
Stimulus measures put in place by governments, including the C$100 billion ($71.2 billion) so far in Canada, would offer support, he said.
"We've never seen that type of support outside of a world war," he said, adding that it is a bit difficult to asses the mitigating impact on the economy for this magnitude of fiscal stimulus.
The bank also has sufficient capital and liquidity to weather the crisis, he said.
RBC had a common equity tier 1 (CET1) ratio, the measure of a bank's capital strength, of 12% of risk-weighted assets in the first quarter, when the pandemic's impact was still limited.
The current minimum CET1 requirement for major Canadian banks is 9%, reduced by the banking regulator last month to increase lending capacity as the coronavirus outbreak's toll grew.
While the bank saw significant drawdowns in credit lines in the first three weeks of the crisis, these have slowed as access to markets has improved, the CEO said.
McKay said he expects the recovery to take longer than expected, as consumers and businesses make more permanent changes to the ways they operate and wariness about spikes in COVID-19 cases lingers.
"We’re going to have to support businesses and consumers a little bit longer than we might have planned, even a month ago," McKay said. "Most people were talking about a sharp V (-shaped recovery) or a U at a minimum, with a sharp upside. I don’t think we can expect that."
The bank has so far processed about 250,000 payment deferrals on mortgages and other loans for customers struggling due to the health crisis, McKay said at its annual shareholder meeting earlier in the day.
RBC shares were up nearly 2% at midday in Toronto, broadly in line with the Toronto stock benchmark.
