26 May 2020 - 19:35Bank of Nova Scotia’s quarterly earnings plunged 41% after the lender set aside a record amount for loan losses, giving investors their first indication of how the coronavirus pandemic will affect fiscal second-quarter results at Canadian banks.
“Credit was largely better than expected,” Barclays analyst John Aiken said in a note to clients on Tuesday. Still, “the market was obviously expecting more reserves to be taken” and it’s likely “additional reserves will need to be taken in future quarters as the true impact of the pandemic will be felt”.
Scotiabank is the first large Canadian lender to report second-quarter results. The country’s six biggest banks are expected to post a 44% profit decline in the quarter, the median of estimates compiled by Bloomberg Intelligence. That would be the biggest drop since 2009. Despite the surge in provisions, loans aren’t showing signs of deteriorating. Net impaired loans accounted for 0.53% of overall customer loans, down from 0.61% a year earlier, and net write-offs as a percentage of average loans totalled 0.47%, less than 0.5% a year ago.