Bank of Nova Scotia’s renewed focus on credit cards and its online banking platform Tangerine will bolster growth this year as the pace of mortgage lending flattens, group head of Canadian banking Anatol von Hahn said.
“Credit cards are going to help us tremendously, not just for the next year but for the next years,” von Hahn said this week in an interview. “Tangerine is exactly the same thing.”
Canadian banking is Scotiabank’s largest and most profitable business, based on return on equity, according to financial statements. The business accounted for C$2.15 billion ($2 billion) of the Toronto-based bank’s C$6.61 billion of earnings last year. Canadian banking profit surged 19 percent last year from 2012 after adding contributions from its takeover of ING Direct Canada, which Scotiabank renamed Tangerine on April 7.
Canadian banking has a strong foundation with good potential for expansion, including “meaningful growth” from its underperforming credit-card business over the next several years, Chief Executive Officer Brian Porter, 56, said at the bank’s April 8 annual investor meeting in Calgary.
Scotiabank expects increases in checking accounts and balances as it shifts focus to building relationships with more customers instead of pursuing transaction-based banking, von Hahn said.
Commercial banking will also improve and the pace of growth will rise more in two to three years, von Hahn said. Lending for larger Canadian companies that borrow C$10 million to C$100 million will outpace that of mid-level companies that seek C$3 million to C$10 million in loans, while small-business lending will remain strong, he said.
“In the mid-market there’s still plenty of opportunity for us to grow,” von Hahn said. “There’s also a big opportunity, we think, in the small-business sector.”
Scotiabank expects the pace of mortgage lending to stay “fairly constant” for the year, with the lender choosing not to be first to cut mortgage rates to win business even amid Canada’s spring home-buying season, he said.
“We are always competitive, but we don’t lead on the rates,” von Hahn said. “We don’t compete or differentiate ourselves on price, but we will be competitive.”
“We’re going to see a 2 to 4 percent type of growth, but not much more,” von Hahn said.
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