Scotiabank is ‘downturn ready’ with large ‘buffer’ in mortgage portfolio: CEO

Scotiabank is ‘downturn ready’ with large ‘buffer’ in mortgage portfolio: CEO
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TORONTO — The Bank of Nova Scotia’s chief executive officer pushed back at renewed bets against Canada’s banking sector and the risk posed by the housing market, saying that the lender has “a lot of buffer” in the event of a significant downturn.

Brian Porter added during its annual meeting of shareholders in Toronto today that the bank stress tests its $205 billion-mortgage portfolio on a regular basis against some “very harsh metrics” such as a 600-basis point increase in interest rates and a huge jump in unemployment.

His comments come after a Veritas analyst recently urged investors to reduce exposure to the Canadian banks ahead of an “acceleration of credit losses” and prominent portfolio manager Steve Eisman reiterated his bet against the country’s biggest lenders, pointing to weakness in the real estate sector.

Porter says its mortgage portfolio, which is the largest asset class on Scotiabank’s balance sheet, is 42 per cent insured and the loan-to-value ratio on the remainder is approximately 54 per cent, providing a large “buffer.”

He told reporters that while it is not predicting a recession, the Toronto-based bank is “downturn ready” and the lender is “comfortable” with its capital and liquidity levels.

Porter added that while there will always be opposing views, Scotiabank will “prove them wrong in the long term.”

Companies in this story: (TSX:BNS)

The Canadian Press

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