Analysts dissect charge-offs, lawsuits, and why big six lenders say they can absorb the hit
Nearly $880m of exposure to troubled non-prime lender Goeasy sits on the books of Canada’s Big Six banks, but analysts say the real hit risk lies with Goeasy shareholders, not the banks.
According to Reuters, TD Cowen analyst Mario Mendonca estimates the Big Six have about $879m in total exposure to Goeasy, which primarily lends to Canadian consumers with weaker financial profiles.
Of that, $177m is a revolving loan syndicated across all six banks, $89m is a secured loan with another $99m of borrowing capacity, and about $215m of Goeasy’s customer loans serve as collateral.
The outlet also reported that Goeasy has drawn $613m from its Trust I warehouse facility, a funding line with capacity of $1.12bn that finances loans until they move into a final securitization.
Mendonca said Bank of Montreal, Royal Bank of Canada and National Bank of Canada are named lenders to Goeasy.
According to Reuters, he said banks are exposed only to Goeasy as a firm, not to its underlying borrowers, and that shareholders would absorb any losses first.
He wrote that he does not see exposure to GSY as a “meaningful headwind for banks.”
The pressure is far more visible on Goeasy’s side of the ledger.
The Financial Post reported that on March 10, Mississauga‑based lender, which lends to Canadians with low credit scores, said it expects an “incremental charge‑off” of about $178m on some loans in its LendCare business segment.
The segment operates in the “merchant-originated secure business,” which allows customers to buy first and pay later.
Goeasy’s share price fell by more than 50 percent that day.
Those credit issues fed straight into earnings.
As per the Post, Goeasy posted a net loss of $336.9m in the fourth quarter, compared with a profit of $54.2m in the same period in 2024.
On an adjusted basis, the net loss was $146.9m, versus $57.7m a year earlier, and the adjusted diluted loss per share widened to $8.93 from $3.32.
The company also booked a $160m goodwill impairment charge, on top of the $178m charge-off.
Despite the hit, Goeasy continued to grow its book.
The Post reported that the company generated $951.5m in loan originations in the quarter, up 17 percent year over year.
Chief executive Patrick Ens told analysts the origination levels highlight an opportunity “to provide a valued service to an underserved customer base.”
The company reduced its workforce by about 9 percent in March and now employs 2,600 people, according to the same report.
Ens signalled a strategic shift after the LendCare fallout.
He said the leadership team is “spending some time reflecting on how we got to this point” because “these aren’t results that we want to attain.”
He conceded that expectations for the “merchant-originated secure business” are “not being met” based on recent data and called it “an excellent learning opportunity” that allows Goeasy “to recalibrate our strategy.”
According to the Post, he said the company will pull back from its weakest-performing segments and focus on areas where it has the “greatest confidence,” including home loans and loans directly given to Canadians.
Goeasy expects its percentage of charge-offs to improve into the mid-teens for fiscal 2026 from 23.8 percent in the fourth quarter of 2025.
Analysts remain cautious about that path.
National Bank of Canada analyst Jaeme Gloyn wrote that the “new information gained” from Goeasy’s release “tilted negatively,” according to the Post.
He said delinquency rates are running “significantly higher than previously thought,” more than double in Q3 2025, and projected charge-offs higher in Q1 2026 than his “mid-teens” baseline.
He also cited “elevated macro risk (higher inflation) and execution risk,” even though management maintained full-year charge-off guidance.
RBC Capital Markets analyst Bart Dziarski also described sentiment as negative, as per the Financial Post.
He said Goeasy’s “subsequent event disclosure” shows the company has knowledge of proposed class action lawsuits “alleging, amongst other things, misrepresentation of public disclosures for certain periods.”
According to his note, the lender cannot yet estimate the potential impact and expects more lawsuits to be filed.
Reuters reported that Goeasy “shocked market observers” when it pulled its forecast, cut its dividend and took a charge-off tied to weakness in a loan book focused on auto, car and bike financing.
The same article added that Goeasy said it had secured waivers from lenders on certain financial covenants for the fourth quarter, and that its shares fell a further 2.3 percent on Wednesday after it reported a bigger-than-expected loss on Tuesday.
