Scotiabank hikes dividend as Q3 profit beats estimates

The Bank of Nova Scotia reported better than expected earnings Tuesday and said it is actively pulling back in domestic mortgage lending as worrying signs have emerged in the Vancouver and Toronto housing markets.

The third-biggest lender announced that it saw growth in both domestic and international banking, despite fears that slowing domestic borrowing and energy loan losses would weigh on earnings. Scotiabank reported earnings per share of $1.55 for the third quarter, compared with analyst expectations for earnings of $1.46, based on analysts polled by Reuters.

During a conference call, executives with the company said that they were ceding market share in the mortgage lending space in Canada, hoping that limiting exposure to housing loans will help insulate the bank from any correction or crash in the Canadian housing market.

“We have been taking progressive action across a number of( mortgage) portfolios,” said James O’Sullivan, executive vice president of Canadian banking. “We’re tightening exceptions, tightening organizations and reducing pre-approvals.”

O’Sullivan said that Scotiabank’s pull back in the mortgage market is “very much a choice.”

“We’re being prudent — I think we’re being vigilant in the market, but we’re not overly concerned,” he said.

Scotiabank also reported that the amount it had set aside to cover bad loans in the energy sector had declined for the quarter. The bank was seen as being among the most exposed to such loans, but a rebound in oil prices in the third quarter helped energy firms make payments.

“Provision for credit losses declined $181 million from last quarter,” said Brian Porter, President and CEO of Scotiabank. “The majority of the decline related to lower losses in the energy sector, which is consistent with our previously stated expectations that energy losses had peaked during the last quarter.”