Scotiabank’s credit quality remains healthy even though it plans to increase its loan loss provisions given the challenges arising from COVID-19.

Scotiabank’s President and Chief Executive officer (CEO) David Noel, who made the disclosure at a Jamaica Observer Business Forum on Wednesday (July 15), conceded that there will be a slight increase in its loan loss provision for the current quarter compared with the $1.33 billion allocated for the previous quarter in April.

While declining to give any numbers for the current quarter as per Jamaica Stock Exchange rules, Noel did intimate that credit delinquency should remain low as it did in the April quarter when the out-turn was 0.8 per cent of total loans disbursed.

He was quick to note that loan loss provisions do not represent actual loans that have gone bad but just provisions made in the event that some loans have gone into delinquency adding that the bank has not observed any significant increase in bad loans.

“I think that Scotiabank prudence over the years of always taking (loan loss) provisions, putting money aside for a rainy day is really paying off, now we are confident that our provision levels and the way we are doing our provisioning will always ensure that we have enough for any rainy day scenario that arise,” Noel explained.

He pointed to the April quarter where there was a 28 per cent growth in commercial banking showing businesses that employ people and contribute to economic growth, emphasising that Scotiabank is optimistic that Jamaica will get through this COVID-19 crisis.

CONCERNS ON RETAIL SIDE

He admitted that there is some concern on the retail side of banking, which the Scotiabank will be more cautious in its lending strategy.

“We want to make sure we help our existing customers weather the storm. Where as a business, especially larger businesses tend to be more resilient and have access to credit lines, when one of the income earners or the only income earner in a small household loses their job, it has a significant impact so we expect there is going to be some increase in provisions; an increase in actual losses now for people who do not have the income to service the loans,” the Scotiabank president argued.

He made the point that Scotiabank tends to be more conservative in its credit assessment process and as such the bank is confident that it will have enough provisions and liquidity even if there is a second phase of COVID-19.

However, he said there is some good in that coming out of the first phase of the bank’s Customer Assistance Programme (CAP), many retail customers have weathered COVID-19 and have resumed their loan payments.

Under its CAP initiative, which was announced in April, retail and business banking customers, who contact Scotiabank indicating that they have been impacted by COVID-19, can have their loan payments deferred for up to six months (three months in the first instance with the possibility of extension for a further three months). Some 25 per cent of the bank’s customers have either accessed the programme or have made enquiries about accessing the programme.

Scotiabank is now employing a more targeted and personalised approach in the present (second) phase of (CAP).

In this phase, customers will have a conversation about the impact of COVID -19 income and other things in order to determine a long-term solution.

This comprehensive approach will see customers not just deferring loans month after month, thus incurring more charges to the extent that they can no longer service the loans but a sustainable long-term option is discussed and arrived at between the bank and its customers.