Scotiabank's Soured Oil-and-Gas Loans Jump 72% in Fourth Quarter

  • Loan losses in energy sector are `modest,' CFO McGuckin says
  • Bank of Nova Scotia has C$16.5 billion oil-and-gas exposure

Bank of Nova Scotia’s impaired oil-and-gas loans jumped 72 percent over a three-month period as the Toronto-based firm increased lending to the energy industry amid slumping oil prices.

Soured loans for oil and gas climbed to C$165 million ($123 million) as of Oct. 31, up from C$96 million at the end of July and C$44 million a year ago, according to financial disclosures released Tuesday. Two Canadian companies previously on Scotiabank’s “watch list” were classified as impaired in the fiscal fourth quarter, adding C$24 million to loan losses for the oil-and-gas category, Chief Financial Officer Sean McGuckin said Tuesday in an interview.

“We’ve said before we’d have some fender benders, but these are very modest levels of loan losses," McGuckin said. "We’re very comfortable that we’ve got a very strong oil-and-gas book."

Scotiabank said its oil-and-gas exposure was C$16.5 billion in the quarter, representing 3.5 percent of its total loan book. That’s up from C$12.8 billion a year ago, when it represented 2.9 percent of loans.

Oil prices have fallen almost 40 percent in the past year as a record surplus persists.

"Where we’ve been growing is in the sectors that are benefiting quite nicely from the lower oil price," McGuckin said, including companies involved in pipelines and storage and refineries. "It’s more the upstream and the oil service fields that are a bit more challenged in this environment."

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