Scotiabank reins in mortgage lending, stays vigilant
By Matt Scuffham
TORONTO (Reuters) - Bank of Nova Scotia (BNS.TO: Quote), Canada's third-biggest lender, has pulled back on mortgage lending in its domestic market, potentially insulating itself if house prices fall in Vancouver and Toronto.
Canada's banks face heightened scrutiny of their mortgage underwriting practices as authorities try to tackle the potential threat of a housing bubble in the two cities, where prices have soared.
"We've ceded some market share. That is very much a choice," James O'Sullivan, group head for Canadian Banking, told investors after the bank reported third-quarter earnings that beat analyst estimates.
"I think we're being prudent, I think we're being vigilant in this market but we're not overly concerned. We believe we've constructed a very solid mortgage book here," he said.
O'Sullivan said Scotiabank was turning down more mortgage applications than it had done in the past.
"We have been taking progressive actions across a number of portfolios. Those would include tightening exceptions, tightening of originations and reduced pre-approvals," he said.
Canada's third-biggest lender earned C$1.55 per share in the quarter, up from C$1.46 a year earlier. Analysts had on average expected earnings of C$1.48 per share, according to Thomson Reuters I/B/E/S.
The bank benefited from a decline in funds set aside to cover bad loans to energy companies, with a partial recovery in the price of oil helping borrowers pay back credit. Continued...