* Low oil price has hurt Canadian banks
* Scotiabank says expects more provisions for bad loans
* Bank has 5 percent of energy portfolio "on watchlist"
(Adds CEO, CRO comments from conference call)
By Matt Scuffham and Amrutha Gayathri
March 1 (Reuters) - Bank of Nova Scotia BNS.TO , Canada's
third-largest bank, said on Tuesday it had set aside more funds
to cover bad loans in the oil and gas sector and warned of worse
to come as the slump in crude prices hurts its energy clients.
Scotiabank, which has the biggest direct exposure of the
major Canadian banks to the oil and gas industry, followed
rivals Royal Bank of Canada RY.TO , Bank of Montreal BMO.TO
and Canadian Imperial Bank of Commerce CM.TO in reporting
increased bad loan provisions in the first quarter.
Toronto-based Scotiabank said funds set aside for credit
losses rose 16 percent to C$539 million ($399.94 million) in the
quarter to Jan. 31, mainly due to higher provisions in the oil
and gas sector.
"We expect there to be additional provisions for some of our
loans in the energy sector," Chief Executive Brian Porter told
analysts on a conference call to discuss the results.
Scotiabank Chief Risk Officer Stephen Hart said the bank
during the quarter had downgraded around 10 percent of its
energy portfolio, primarily in the exploration and production
sector, adding nine names to its "watchlist" of risky loans.
"Approximately 5 percent of our energy portfolio is on the
watchlist, up slightly from last quarter. The watchlist consists
almost entirely of E&P and oil services, which are the areas
primarily affected by the drop in oil prices," he said.
Oil prices touched 12-year lows in January, putting
increased pressure on Canadian banks' energy clients and leading
to rising loan defaults.
Scotiabank, Canada's most international bank, reported
first-quarter net income of C$1.81 billion, a 5 percent increase
from the same period in the previous year, helped by growth in
its international banking business.
Diluted earnings per share rose 6 percent to C$1.43,
compared to $1.35 the previous year. Analysts on average had
expected earnings of C$1.42 a share, according to Thomson
Reuters I/B/E/S.
Net income attributable to shareholders at the lender's
international banking unit jumped 21 percent to C$505 million,
boosted by a weak Canadian dollar and growth in Latin America.
Scotiabank has been increasingly focusing on Mexico,
Colombia, Chile and Peru.
The bank raised its quarterly dividend by 2 Canadian cents
to 72 Canadian cents per share.
Scotiabank shares were up 3.9 percent at $56.91 in
mid-morning trading.
($1 = 1.3477 Canadian dollars)
(Editing by Paul Simao)