The COVID-19 pandemic has created a period of “unprecedented uncertainty” but Scotiabank remains well-positioned with ample capital and liquidity and is focused on helping customers and employees weather the crisis, said chief executive officer Brian Porter.
“We understand that our job here is to be a shock absorber for the economy, so we’re going to see Canadian households through, we’re going to see Canadian small business through and provide them with the capital they need to get through this,” he said on a call with investors and analysts on Tuesday.
His comments came during a virtual fireside chat to discuss the ramifications of the ongoing novel coronavirus outbreak and the Bank’s response and preparedness for the challenges ahead as non-essential businesses and consumers pause activity in a bid to slow the virus’ spread.
In terms of being downturn-ready, Porter said Scotiabank has more than adequate capital, and the Canadian banking industry overall has about three times more capital than they would have during the 2008 financial crisis. Porter was Scotiabank’s chief risk officer during that period.
As well, Scotiabank has roughly $10 billion in capital in excess of the regulatory minimums and $5 billion of allowances for credit losses, he added.
“Our balance sheet’s in very good shape, ample liquidity, lots of capital, and the loan losses that we see out of energy are not material and very manageable for the bank,” Porter said.
The oil price war between Russia and Saudi Arabia has sent the price of crude plummeting, with ripple effects for the Canadian energy industry.
Porter noted that oil and gas exploration and production makes up only 1% of the bank’s loans globally and 53% of that is investment grade.
“It shows you the quality of the portfolio… We’re going to have some loan losses, as will all banks globally, in terms of the energy sector. There’s no question about that. But I think you have to look at this from a materiality standpoint,” he said.
Another key point in terms of the Bank’s preparedness, Porter said, is the hefty investments it has made over the years in technology, such as cybersecurity and, critically, business continuity planning (BCP).
Scotiabank focused on BCP – putting systems in place to prevent or respond to disruptions – due to events encountered in certain markets within the Bank’s international footprint, such as hurricanes in the Caribbean or earthquakes in Chile, he added.
“We learned from our prior experiences and you know that with most of our staff working remotely today, the investments we made in BCP are paying off very well,” he said. “We are even having people from contact centres today working from home. And they have got access to VPN and are able to take care of our customers in that fashion.”
Scotiabank and other Canadian banks have announced several measures to offer relief to customers and businesses amid the COVID-19 outbreak, such as mortgage deferrals and other loan relief.
The Bank’s call centre has been fielding more than 80,000 calls per day in the contact centre, and calls to the mortgage and loan teams are up more than 500%, Porter added.
Scotiabank recently launched an online mortgage deferral program, and, in five days, it has approved more than 60,000 mortgage deferrals, he said.
This period where health officials are urging people to stay home is going to have a “profound impact” on the way customers access their banking, Porter said. He notes that the Bank has received more requests for e-statements in the last two months than in the past year.
“We’re seeing Canadians adapt to the circumstances… People are changing the way they bank, as necessity is the mother of invention,” he said.
Porter said there are no plans to reduce Scotiabank’s workforce in Canada.
“All our employees are engaged today. In terms of cost structure, we don’t intend nor would we think of laying anybody off in this country as we go through this process. We want to keep our employees engaged. We provided some bonuses for people that are on the front-line, and it’s important that we keep our employees safe, healthy and engaged in terms of performing for our customers.”
As part of a series of proactive measures to protect employees, there is increased access to medical advice, said Porter.
“The bank is focused on our employees and our employees’ safety, and taking all the protocols necessary, including having nurses on staff at contact centres, and employees having the availability to call our chief medical officer. So, we’re going to extra lengths to make sure that our employees are safe and therefore our customers.”