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Canadian Imperial Bank of Commerce (CIBC) at Bay and King Streets in the Financial District in Toronto.Deborah Baic/The Globe and Mail

Canadians are bogged down by more household debt than ever, but the recovering economy is allowing them to shoulder that burden better than in recent years.

New figures from the banking sector suggest the average consumer, while still not clear of debt, is becoming more adept at keeping up with their payments.

Figures unveiled by Canadian Imperial Bank of Commerce and National Bank of Canada, the first of the nation's six largest lenders to report first-quarter earnings, show an easing of pressure on credit card portfolios in particular. Rather than letting payments slide into arrears, which had been happening with increasing frequency, consumers are getting back on track.

At CIBC, which operates the largest credit card portfolio of any domestic bank, provisions for credit losses in its retail division - the amount of money the banks write off for bad loans - fell to $275-million in the most recent quarter, from $367-million a year ago. Much of that decline "was due to lower writeoffs in the cards and personal lending portfolios," CIBC said.

Meanwhile, National Bank's loan loss provisions fell to $39-million in the first quarter, from $43-million a year ago. Credit card losses were the biggest factor, falling to $24-million from $28-million.

The shift comes after worries were raised by Ottawa late last year over the high debt burden of Canadian consumers. Household debt hit record levels in Canada, prompting Bank of Canada Governor Mark Carney and other policy makers to raise concerns over the potential toll on an economic recovery. Highly leveraged consumers who are strapped for cash are unable to contribute to economic growth.

Analysts say the numbers are not necessarily a confirmation that Ottawa's message has sunk in with consumers, forcing them to put the plastic away and pay down their monthly bills. Rather, a drop in loan loss provisions is generally linked to a stronger economy. When employment is higher people are better able to make payments.

"When you look at the consumer debt issue right now, the employment situation is improving, interest rates remain very low, so the serviceability of the debt is still high," said Rob Sedran an analyst at CIBC. "So the debt issue for me is more one of what does this mean for loan growth?"

At CIBC, the amount of credit card bills contractually past due in the first quarter was $898-million, compared to $1.02-billion in the fourth quarter of fiscal 2010. Of that, the vast majority - $609-million of credit card balances - was less than 31 days in arrears. A payment has to be 90 days past due to be in default.

The lower loan loss provisions contributed to higher earnings at the two banks, a trend that analysts suggest bodes well as Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia and Bank of Montreal prepare to report earnings in the next two weeks.

Profit at CIBC, the country's fifth-largest bank, rose nearly 23 per cent in the first quarter, also driven by earnings at its retail banking operations and a strong performance in its wholesale banking division.

The bank reported a profit of $799-million, or $1.92 a share, compared to a profit of $652-million, or $1.58, for the same period a year ago. The results exceeded analysts' expectations. Excluding one-time items, the bank's profit was $1.97 a share, about 20 cents a share higher than analysts' forecasts.

National Bank's profit jumped 45 per cent to $312-million, or $1.80 a share, compared to $215-million, or $1.22, a year ago, driven by higher-than-expected income from the wealth management and markets divisions.

Analyst John Aiken at Barclays Capital called the earnings an "auspicious" beginning to the first-quarter bank earnings season, as both bank stocks rose.

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