(Montreal) The Bank of Montreal is renouncing indirect auto loans in order to redistribute resources following an increase in bad debts, the financial group announced.
She also indicated that this decision will result in an unspecified number of layoffs in Canada and the United States.
It comes at a time when provisions for bad debts more than tripled to $492 million for the quarter ending July 31, compared to the same period the previous year.
For the retail lending sector alone, BMO’s provisions for losses jumped 800%, from $9 million to 81% in one year.
These revenue losses for BMO are indications of the growing financial burden weighing on customers who cannot make ends meet because of escalating interest rates over the past 18 months.
Additionally, the rising cost of loans has begun to slow demand and transactions amid intense competition among Canadian banks over interest rates and growing concerns about a general economic slowdown.
Bank of Montreal’s indirect lending division works with automobile dealerships to help finance vehicle purchases by customers who then repay those loans through monthly payments.
The Bank of Montreal will still continue to do business with dealers, particularly by financing inventory.
“By ending indirect vehicle financing, we retain the ability to focus our resources on areas where we are stronger,” BMO spokesperson Jeff Roman said in a statement. to The Canadian Press.
He did not specify when the end of the agreement with the dealers will come into effect.
“We will work closely with affected employees to provide them with support and ensure that they are treated with fairness and respect,” added Mr. Ronan.
During the last quarter, costs related to layoffs totaled $223 million before tax, but the company did not disclose the number of employees laid off.