Scotiabank boosts Q4 profits with less money set aside for bad loans

globalnews.ca:

Scotiabank says it expects to see continued loan pressure and political uncertainty in the months ahead as it reported profits that were up from a year ago but below analyst expectations.

The bank kicked off a week of bank earnings Tuesday as it reported a fourth-quarter profit of $1.69 billion, up from $1.35 billion in the same period last year, as it set aside a smaller amount for bad loans compared with a year ago.

Profits were hit by taxes and a writedown of its holding in a Chinese bank, while its Canadian operations were affected by the softening economy, said chief executive Scott Thomson.

“The realities of a slowing economy and the impact of peak interest rates made for a challenging operating environment,” he said on a conference call with analysts.

Looking ahead, Thomson said new governments, such as those in the U.S. and Mexico, bring uncertainty on trade policy and relations but that he’s optimistic on the outcome.

“We are closely monitoring policy actions from the new administration in Mexico as well as the incoming U.S. administration,” said Thomson.

“We believe policy will ultimately support a co-operative environment that encourages capital investment and continued regional growth.”

The bank expects loan pressure, especially on credit cards and auto loans, to stay elevated in the first half of 2025 before easing in the second half as interest rates continue to come down.

“We anticipate additional easing through the first half of the year, which we expect will be stimulative to activity in the domestic housing and mortgage markets and buoy consumer and business confidence,” Thomson said.

While banks are expected to still see rising provisions for potentially bad loans, Scotiabank set aside $1.03 billion in