Toronto skyline in financial district
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Although downside risks abound, Canada’s Big Six banks are well positioned to confront those emerging challenges, says a new report from Fitch Ratings Inc.

The credit-rating agency points to the growing risks the banks are facing, from long-standing concerns about the Canadian housing market to oil price volatility and the troubled trade environment. Yet, the Big Six banks are “well positioned” to weather these mounting risks and declining economic growth, which Fitch sees moderating to 1.9% in 2019 from 2.1% in 2018.

In fiscal 2018, the banks all reported record or near-record earnings, Fitch says. Their return on assets also improved over the prior year, and they continue to enjoy “excellent” credit quality.

“Over the fiscal year, most of the banks benefited from three policy interest rate hikes totalling 75 [basis points], strong fee income and customer adoption of digital channels,” says Foster Cheng, director of financial institutions at Fitch.

“The Canadian banks remain vulnerable to credit underperformance in housing and the oil markets along with lingering trade tensions with the U.S.,” added Mark Narron, director at Fitch. “Despite these risks, the major banks are adequately positioned from a capital standpoint to weather a moderate economic downturn and unexpected shocks particularly given recent measures by regulators to increase capital buffers.”