Scotiabank saves more for bad loans

Bank is seeing friction’ among its customers with variable-rate mortgages and used-car debt

- IAN BICKIS

Rising strain in auto loans and mortgages led Scotiabank to set aside more money in the second quarter, leading to a drop in profits and analyst concern about its growth prospects.

The bank said Tuesday its net income fell to $2.09 billion or $1.57 per diluted share for the quarter ended April 30, down from $2.15 billion or $1.68 per diluted share in the same quarter last year.

“The impact of higher rates is increasingly weighing on consumers,” said chief executive Scott Thomson on an earnings call.

“The reality of a higher-for-longer rate scenario will naturally result in a continuation of elevated credit provision in our retail portfolios.”

Scotiabank set aside $1.01 billion in the quarter for potentially bad loans, up from $709 million in the same quarter last year. The rise, coupled with downward pressure on loan volumes, put the bank at the high end of its guidance on its loss ratio.

Loan balances in Canadian banking were down one per cent from last year, including mortgages down five per cent, while business loans were up eight per cent and credit cards up 18 per cent.