CORRECTED-UPDATE 3-Scotiabank reins in mortgage lending, stays vigilant

Tue Aug 30, 2016 1:01pm EDT
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(Corrects identity of executive named in 3rd and 5th paragraphs to James O'Sullivan, group head for Canadian Banking, from James McPhedran, executive vice president, Canadian Banking)

* Bank ceding mortgage market share -executive

* More mortgage applications being declined -executive

* Third-quarter earnings C$1.55 per share vs C$1.48 forecast

By Matt Scuffham

TORONTO, Aug 30 (Reuters) - Bank of Nova Scotia, 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.   Continued...