By Ketki Saxena
Investing.com -- At a Bank of Nova Scotia (TSX:BNS) conference hosted in Toronto earlier today, CEO Brian Porter highlighted his belief that despite economic turbulence, volatile equities, and growing worries of a recession, the conditions in Canada are not ripe for a recession.
While he did acknowledge that excessive liquidity and central banks’ rapid tightening of policy are certainly causing turbulence in markets and economies, he, along with Scotia’s economists, believes that “We’re going through an adjustment period”, rather than sliding towards a slowdown.
He notes that despite turbulence “There have to be some conditions precedent in place for – I don’t even like using the ‘R-word – but for a recession. And we just don’t see those.”
As key amongst the contraindications, Porter cites a “really quite bullish” sentiment amongst the Bank’s corporate clients across Canada, the U.S., Latin America and the Caribbean.
He notes that, on the ground, businesses appear to be “coping quite well with the inflationary pressures on their business in terms of passing along costs”, and that “balance sheets are in very good shape”.
He also notes that business owners, flush with excess cash stockpiled during the COVID-19 pandemic are considering plans for growth and expansion, adding that he believes there’s a “real disconnect between Main Street and Wall Street or Bay Street in terms of the direction of the economy and feeling about the economy.”
The Scotiabank Chief executive also pushed back against the conception of risks to banks from economic slowdown or capital markets volatility - which were cited as major headwinds to the Canadian Banking sector’s profits in the previous quarter.
Although Canadian banks - including Scotia - have seen shares tumble following mixed earnings, and continue to trade well below their historical averages - the banks continued to see robust loan growth from both its retail and business banking sector: business loans were up 23% YOY, while residential mortgages, up 14% in spite of a cooldown in housing, boosted retail loans.