Scotiabank CEO cautious on housing, no plans to leave

SASKATOON, Saskatchewan (Reuters) - Bank of Nova Scotia BNS.TO Chief Executive Rick Waugh says Canada's simmering housing market gives reason for caution, but that it's up to the country's banks, rather than the government, to manage the risks of their massive mortgage portfolios.

Rick Waugh, President and CEO of Bank of Nova Scotia, speaks at the Reuters Finance Summit in New York November 12, 2008. REUTERS/Brendan McDermid

“The current concerns about Canada’s housing market are reason for caution but not pessimism. We can and will manage through any potential housing market problems,” he told Scotiabank’s annual general meeting in Saskatoon, Saskatchewan, on Tuesday.

In separate comments to Reuters, Waugh also said he has no immediate plans to step down from his post as CEO, and said the current regulatory environment should provide opportunities for the bank’s capital markets business.

Several Canadian bank executives - Toronto-Dominion TD.TO CEO Ed Clark in particular - have said they would welcome further government moves to tighten mortgage rules in a market that has been heated up by historically low interest rates.

The federal government, which has already tweaked mortgage rules three times in the last few years, left mortgage standards unchanged in last week’s budget.

“I agree with our government. It’s up to the banks themselves - not government or regulators - to manage our risks and advise our customers appropriately,” Waugh said.

Canada’s appetite for low-rate mortgages has been helped along by aggressive competition by the banks to offer attractive deals, and has raised fears that the market could deflate dangerously when rates eventually rise. Consumer lending, and mortgages in particular, are a key revenue driver at the banks.

With loan growth expected to slow, price competition among the banks has intensified. In a recent mini price war, home loans were offered at 2.99 percent.

Waugh said Scotiabank has pulled its 2.99 percent offer, but said offering cheap mortgages doesn’t necessarily raise risks to the housing market.

“This price war I don’t think fundamentally moved anything,” said, pointing to credit card lending as a bigger area of concern.

“What we don’t want to do is compromise the quality of the lending, to make sure our customers don’t get themselves into trouble.”


Waugh also pointed to recent global regulatory tightening as a concern for Canada’s banks, but noted initiatives such as Basel III regulations and the U.S. Volcker Rule could provide opportunity for the bank, by forcing U.S. and European banks to scale back their capital markets businesses.

“I think over the next 12 to 18 months there’s going to be a lot of changes there,” he said.

Scotiabank has been overhauling its capital markets business over the last few years, gaining primary dealer status in Germany, France, and the United Kingdom, and setting up a bond desk in London.

“It’s a very good business that’s going to be leveraged on the fact that governments are going to issue a lot of debt and we’re going to be distribute it on the behalf of clients,” he said.


Waugh, who has aggressively made acquisitions throughout the recent crises, said he’s hopeful the bank will close its acquisition of a 20 percent stake in China’s Bank of Guangzhou this quarter.

Scotiabank announced the C$719 million ($726.59 million) deal in September and had hoped to conclude it by now.

“There are no substantial issues on that that we’re aware of,” Waugh said.

He also said he has no plans to step down from his post of CEO in the near term. Waugh, 64, began his career at the bank as a teller in 1970 and became CEO in 2003. Analysts have begun to speculate that he may soon step down.

“The board is very involved and we discuss (succession) regularly,” he said. “But it won’t be imminent.”

($1=$0.99 Canadian)

Reporting By Cameron French; Editing by Peter Galloway