BNS flags rising Caribbean mortgage write-downs as parent posts record quarter

The Bank of Nova Scotia (Scotiabank) disclosed slightly higher mortgage impairments in the Caribbean during its July third-quarter on a sequential basis, even as the Canadian parent reported record earnings and revealed steps to take full ownership of its Jamaican subsidiary.

The bank’s overall improvement was “partially offset by higher mortgage impairment in Chile and the Caribbean”, according to the bank’s chief risk officer, Shannon McGinnis, in comments during an earnings call to analysts on August 25.

The Caribbean’s provision for credit losses (PCL) rose to CDN$34 million in the third quarter from CDN$31 million in the prior quarter, but dipped year over year from CDN$35 million. Other segments decreased their provisions including Canada, USA, Mexico, Chile and the bank’s ‘other’ category. Only Peru increased PCLs along with the Caribbean. PCL is a forward-looking accounting estimate, not actual losses yet incurred.

During the quarter, the Caribbean’s PCL on a sequential basis stood at 1.23 per cent of average net loans, compared with 1.13 per cent in the second quarter, consistent with management’s comment. It nonetheless declined year on year from 1.32 per cent in the third quarter of 2025.

The group did not disclose any specific reason for the increased provisioning. The disclosure however marks one of the first times since Hurricane Melissa struck the Caribbean last October, that Scotiabank’s parent filings has drawn attention to the Caribbean mortgage portfolio. Scotiabank in Jamaica indicates that its delinquency for mortgages remains low.

Structurally, Scotiabank’s Caribbean and international banking segment run PCL ratios more than double the bank-wide ratio of 56 basis points – a gap that reflects the higher-risk mix of its Caribbean, and Latin American loan books compared with the Canadian retail portfolio.

SCOTIABANK REGIONAL DEALS

The Caribbean generated CDN$740 million in revenue in the third quarter, compared to CDN$700 million a year earlier. Its operations span The Bahamas, Barbados, Cayman Islands, Dominican Republic, Guyana, Jamaica, Trinidad & Tobago, and the Turks and Caicos Islands. It previously operated a wider Caribbean network that was divested in recent years.

Scotiabank group reported net income of CDN$2.95 billion, up 17 per cent from CDN$2.53 billion a year earlier. The Caribbean earned CDN$291 million in consolidated net income, a 9.4 per cent increase.

The group continues to simplify its regional structure.

“Consistent with our strategy, we have recently executed on initiatives to generate additional profitability in our priority North American markets and to simplify our international banking portfolio,” CEO Scott Thomson said

The group in June proposed to acquire all outstanding minority shares of Scotia Group Jamaica Limited for some CDN$506 million through a court-approved scheme of arrangement. The group filing states that the transaction will reduce the group’s common equity tier 1 (CET) capital ratio by roughly five basis points at closing – a direct capital cost of consolidating full ownership. Under the arrangement, majority shareholder Scotiabank Caribbean Holdings Limited, which already holds 71.8 per cent of Scotia Group Jamaica, would repurchase the remaining shares at J$61.50 each, taking the company private and off the Jamaica Stock Exchange. The deal is expected to close in the fourth calendar quarter of 2026, subject to court and shareholder approval.

Separately, Scotiabank completed the transfer of its banking operations in Colombia, Costa Rica and Panama to Colombian lender Davivienda on December 1, 2025, in exchange for a 20 per cent stake in the combined entity. The bank said the divestiture benefited its CET1 ratio by roughly 10 basis points in the following quarter, primarily through a reduction in risk-weighted assets.

business@gleanerjm.com