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Feb 23, 2021

'Credit is last year's story': Scotia CEO sets sights on growth

Scotiabank's strong quarter reflects confidence in Canada's economy: CEO

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Bank of Nova Scotia President and Chief Executive Officer Brian Porter is confident the days of setting aside more cash to cover potential sour loans are a thing of the past.

Porter said in an interview Tuesday that the bank took a cautious approach to provisions for credit losses in the first fiscal quarter of 2021, and that he expects reserves will continue to fall as the economic recovery continues to gain traction.

“There will be releases, in terms of credit going forward for Scotiabank, and that’s (because) we over-provided a bit. We erred to the conservative, which is what we do,” he said. “So, credit trends are better than what we expected last April, or May or June, and that’s a good thing. That speaks to the strength of the underlying economy; the strength of the Canadian household.”

Provisions for credit losses fell to $764 million in the quarter that ended Jan. 30, down from $1.13 billion in the previous quarter. That’s been a key trend for the big Canadian banks, who have steadily released previously set-aside funds as it became clear fewer loans would turn sour.

Porter said the Canadian consumer has acted prudently throughout the pandemic, which helped drive the decision to release funds.

“Canadian households have managed this pandemic really quite well, under a fair amount of stress,” he said. “They paid off higher-interest rate debt - credit cards, for example - and managed accordingly.”

Porter said the bank is shifting its focus away from playing defence with higher provisions. Instead, he says the bank is turning to the task of growing the domestic and global economies in hopes that the worst of the economic damage from the pandemic is behind it.

“Credit is really last year’s story, in terms of the build of allowances. What we’re focused on, and what the market’s focused on is: ‘How do we grow here? How do we grow the Canadian economy? How do we get the global economy back on track? How do we create jobs for the future?’ That’s really what we’re focused on.”