Bank of Nova Scotia took too much risk on U.S. energy companies -- a move that resulted in the majority of soured loans for Canada’s third-largest lender, Chief Executive Officer Brian Porter said.
“We went a little bit too downmarket in the U.S., and that’s where the bulk of our loan losses have been," Porter, 58, said Wednesday during an investor conference in Toronto sponsored by his bank. “That sometimes happens throughout a cycle and we’re mindful of that."
Scotiabank, which has the most oil-and-gas loans among Canada’s lenders, said impaired energy loans in the fiscal third quarter rose to C$368 million ($287 million) from C$351 million in the second quarter and C$96 million a year earlier. Scotiabank had C$16.1 billion of energy loans as of July 31, down from C$16.3 billion at the end of April.
“A large part of our portfolio is investment grade, we’re comfortable with it, we’re comfortable with the quality of assets and we’re comfortable with management’s ability to execute," Porter said of the oil-and-gas loan portfolio, adding that energy “will continue to be an important business for the bank."