Canadian commercial lending jumps to 3-1/2-year high -PayNet

Wed Dec 12, 2012 5:00am EST

* Canadian business lending index rises 5 pct in Q3 from Q2
    * Borrowing rises 20 percent year over year
    * Sector growing twice as fast as U.S., says PayNet
    * Commercial loan delinquencies fall in 3rd quarter

    By Claire Sibonney
    TORONTO, Dec. 12 (Reuters) - Commercial borrowing by
Canadian companies hit the highest level in the third quarter
since early 2009, a PayNet survey showed on Wednesday,
suggesting businesses played an outsized role in supporting the
economy as growth cooled.
    PayNet, which tracks commercial financing to millions of
North American small and medium-sized businesses, said its
Canadian Business Lending Index rose 5 percent from the second
quarter and 20 percent year-over-year.
    "We're seeing persisting capital expenditures and low risk
in the market place right now, so it bodes well for the Canadian
economy," said Anthony Zambon, director of PayNet Canada.
    "If capital is the engine of growth in Canada, we're seeing
that the Canadian economy will keep growing over the next three
to five months."
    The index rose to a reading of 172, its highest level since
the first quarter of 2009. PayNet said its Canadian index is
rising twice as fast as the corresponding U.S. index.
    The index marked an eighth consecutive quarter of growth
since bottoming in 2010 and the fifth straight double-digit
advance on a year-over-year basis.
    Still, Zambon said the pace of growth had eased compared
with the second quarter when lending activity notched an 8
percent rise over the prior quarter and a 21 percent gain
year-over-year.
    The commercial lending sector includes independent finance
companies, big banks and non-bank players such as machinery
makers, whose loans and leases to customers are secured against
the equipment sold.
    The report, which tracks lending across a broad range of
sectors including manufacturing, retail and transportation,
offers the latest evidence of an uneven economic recovery.
Zambon noted that anecdotal preliminary data for the fourth
quarter suggests lending growth could continue to slow.
    Official government data last month showed the Canadian
economy grew at a weaker-than-expected 0.6 percent annual rate
in the third quarter as exports fell at the fastest pace in more
than three years, business investment sputtered and the housing
market cooled. 
    Meanwhile, domestic trade data and jobs numbers over the
past few days came in better than expected.
  
    
    FINANCIAL STRESS EASES
    Other PayNet data released on Wednesday showed a fall in
loan delinquencies, a gauge of financial stress, to a record
low.
    Moderate loan delinquencies - defined as those being late by
30 days or more - were down to 1 percent in September from 1.21
percent of total loans in June. It marked the lowest level in
the survey's nearly eight-year history.
    Bill Phelan, PayNet's founder, said the lenders he meets
have told him these are the lowest delinquency numbers that
they've seen in 30 years.
    Severe loans in arrears - those behind more than 90 days -
also fell in September, to 0.33 from 0.41 percent three months
earlier. These longer loan delinquencies were the lowest since
early 2007.
    Businesses "are being cautious with regards to investment
and it could really be the new standard," added Zambon. "They're
being smart about their investing, they're being smart about
when they acquire new equipment, they don't want to be stuck
with unproductive assets on their books."