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TORONTO - The heads of Canada's biggest banks are finally seeing risks around mortgage renewals easing, only for worries about tariffs and political uncertainty to take their place.

"I think the tariffs can do a lot of damage," RBC chief executive Dave McKay said Tuesday at a bank CEO conference hosted by RBC Capital Markets.

"It's disappointing to hear the rhetoric intensify, when we thought it was de-intensifying or mitigating to an extent."

The worry comes as incoming U.S. president Donald Trump has threatened to impose a 25 per cent tariff on Canadian and Mexican imports over what he says is concerns around border security.

McKay said it's not just a question of whether the U.S. will impose tariffs, but whether they'll be broad or targeted, as well as how long they might stay in place. 

"It's causing concern among everybody that it will do economic damage, and we're not sure the objectives it's trying to achieve," he said.

The bank is preparing for a variety of scenarios, said McKay.

CIBC chief executive Victor Dodig said he is also concerned about the risks, but that he's hoping it will become clear the damage tariffs would do to both countries.

"I'm sure that sensible minds will prevail in terms of looking at the integrated nature of our economy, and how do we move things forward for the benefit of American consumers and companies and Canadian consumers and companies."

He said whatever the outcome, the bank will manage through it just like it did during the pandemic, by controlling what it can — and Canada should do the same with actions like an internal free-trade agreement.

"Let's get the controllables right at home first."

Making progress domestically, however, won't be easy after Prime Minister Justin Trudeau announced on Monday he had suspended parliament until March 24 and would be stepping down after a Liberal leadership race. 

The uncertainty around who will lead the Liberals and what will happen with the election this year will likely affect investments in Canada, BMO chief executive Darryl White said.

"What do people do when they're uncertain? They wait ... that waiting that is a natural consequence of uncertainty, is starting I think to set in a little bit in Canada."

It's a contrast to the U.S. which he said had more uncertainty a year ago around government, interest rates and regulatory policy but is seeing spending ramp up.

"Look, you can say what you want about the outcome, but most of that uncertainty has been taken away," White said. "Set aside the drama, there's clearly a pro-growth agenda that people are signing up for."

The uncertainty on the political front is a contrast to the Canadian mortgage market, which is where much of the fretting has been focused for banks over the past couple of years.

Mortgage concerns are ebbing after the Bank of Canada started lowering its key interest rate last year to what is now 3.25 per cent, with further rate cuts expected in the months ahead. 

Borrowers have managed well through the "great renewal" of mortgages, as analysts have called the adjustment for borrowers to much higher rates than they signed on to in the early days of the pandemic. Despite the higher rates, delinquency rates remain below pre-pandemic levels.

Some 60 per cent of RBC customers should renew at lower rates, McKay noted. 

"When we look at the overall payment shocks, it's decompressed significantly."

Many Canadians are still struggling with higher payments, which have also been a drag on the economy, but that is only reinforcing the view that the Bank of Canada will keep pushing down rates aggressively in the short term, he said.

TD Bank chief operating officer Raymond Chun, who is set to take over the top job in April, said the bank already saw activity pick up late last year.

"Certainly we saw a noticeable pick up in Q4 in sales and mortgage volumes inside of TD and as an industry at large, and that was even before the full effect of the two 50 basis points decline had really played through."

Chun noted that about a third of mortgages coming up for renewal in the next two years will likely be at lower rates.

"From a credit risk management perspective, you've probably already seen the higher end."

TD is facing its own challenges though as it works to bring its anti-money laundering program up to standards following a more than US$3 billion fine last year for oversight failures in the U.S.

The bank also suspended its key financial guidance for the year as it works through a strategic review with updates expected later in the year, but Chun said the bank would provide quarterly updates on what they do know. 

There's no question though about the bank's commitment to the U.S., Chun said.

"First and foremost, we are 100 per cent committed to our franchise in the United States."

This report by Ïã¸ÛÁùºÏ²Ê¹ÒÅÆ×ÊÁÏ was first published Jan. 7, 2025.

Companies in this story: (TSX:RY, TSX:CM, TSX:TD, TSX:BMO)

Note to readers:This is a corrected story. A previous version quoted Raymond Chun as saying there had been a 250 basis point decline, when in fact he had said two 50 basis points decline.