From Freightwaves, June 1:
The quarterly earnings report of Canada’s BMO bank, one of the largest lenders to the trucking sector in North America, reflected a deterioration of the company’s book of business with the industry.
Virtually every benchmark number broken out for the company’s transportation sector in the second quarter ended April 30 showed a sequential weakening compared to the first quarter that ended Jan. 31. The deterioration was particularly stark when compared against the second quarter of 2019.
BMO’s transportation sector is believed to be about 75% trucking-based, though there are other transportation-based loans in the portfolio. It is also about 90% U.S.-based. The sector’s performance is considered a strong indicator of the overall health of the market for trucking loans and the industry itself.
The figure for gross impaired loans in the transportation sector rose to C$189 million (US$137.2 million) from C$164 million. In the second quarter last year, that number was at C$147 million.
A bank considers a loan impaired after certain established criteria on its repayment have failed to be met.....MORE
Net impaired loans jumped to C$154 million from C$131 million. A year ago, they were C$117 million.
The difference between the two is accounted for in a category called allowance for credit losses, which rose to C$35 million in the second quarter, up from C$33 million. Accounting standards require a certain amount of reserves, or allowances, be put aside by the bank when a loan is considered impaired.
Writeoffs in the transportation sector, which occur when the bank sees no reasonable chance of collecting its debts, jumped 40% to C$35 million from C$25 million in the prior quarter. A year ago, writeoffs were C$14 million....
