(Bloomberg) — Bank of Nova Scotia missed estimates after setting aside more money than expected for bad credit as tariffs hit its Canadian and Mexican operations.
The Toronto-based lender earned C$1.52 per share on an adjusted basis in its fiscal second quarter, according to a statement Tuesday, falling short of the C$1.56 average estimate of analysts in a Bloomberg survey. Provisions for credit losses totaled C$1.4 billion ($1.02 billion) for the three months through April, more than the C$1.34 billion analysts had forecast.
With Canada’s economy weakening and possibly in the early stages of a recession, the country’s big banks are preparing for potential credit defaults by bulking up on reserves — even on loans that are still in good standing. Its domestic banking unit saw earnings decline by 31% year-over-year, primarily because of a large increase in provisions for credit losses.
“This quarter we increased our performing allowances to reflect the impact of an uncertain macroeconomic outlook,” Chief Executive Officer Scott Thomson said in the statement.
Toronto-Dominion Bank, the first of Canada’s big lenders to report last week, put aside less money than forecast for potential credit losses at C$1.34 billion. But while it provisioned less than expected for impaired loans, it earmarked C$395 million for loans where borrowers are still current but could face risks down the road, up significantly from the previous quarter.
At Scotiabank, provisions for performing loans came in at C$346 million, up from C$98 million in the first quarter.
“The bank substantially increased its provision for credit losses on performing loans this quarter to reflect the impact of a significant deterioration in the macroeconomic outlook indicators, in the US, Canada and Mexico,” it said.
Under Thomson, who became CEO in 2023, Scotiabank has pushed to increase its share of the domestic retail-banking and wealth-management markets. It’s also shifted capital away from underperforming operations in Latin America to Canada, the US and Mexico, acquiring a 14.9% stake in Cleveland-based KeyCorp last year.
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