Monday Market Minute | Feb 11, 2019
Canadian banks retreat from mid-market and non-prime lending, creating deal flow for private credit funds and alternative lenders.
What Moved
Canadian bank earnings calls for Q4 2018 confirmed a deliberate pullback from mid-market commercial lending and non-standard mortgage origination. OSFI's tighter capital requirements and the B-20 stress test pushed the Big Six toward higher-quality, lower-risk credit. The void left in mid-market commercial and bridge lending expanded meaningfully, with private credit managers reporting deal flow increases of 20-30% year-over-year.
Why It Matters
This structural shift represented one of the clearest secular tailwinds in Canadian private markets. Borrowers with sound fundamentals but non-conforming profiles — construction developers, franchise operators, seasonal businesses — found private credit the only viable financing channel. For investors, the opportunity carried attractive yields (8-12% on senior secured debt) with tangible asset backing.
Signal to Watch
Ninepoint Partners and other large Canadian alternative asset managers were expected to announce fundraising targets for new private credit vehicles in the coming weeks. Strong subscription interest would validate the market's conviction in the bank-pullback thesis.