The head of EQ Bank says the recent increase in arrears and provisions for credit losses has likely “crested” as rate cuts are expected to provide relief to the lender’s clients.
“We’re moving on to the better side of things,” Andrew Moor, EQB Inc. CEO, told BNN Bloomberg in a Thursday interview.
“We’re certainly feeling very comfortable with our exposures to real estate at this point, particularly on the single-family side and commercial real estate, so while arrears are up, we’re feeling actually pretty comfortable with kind of the direction of travel.”
Moor said he expects overall credit quality to improve in the coming months as the Bank of Canada “moves into an easing cycle,” with a third-consecutive rate cut widely expected by the central bank at its next policy decision on Sept. 4.
EQ Bank set aside around $20 million for potentially bad loans in the third quarter, which was higher than analysts expected, but an improvement compared to the lender’s second quarter, Moor noted.
The Toronto-based lender reported on Wednesday that net third-quarter income rose by a modest one per cent year-over-year, as provisions ate into the bank’s bottom line.
“(Provisions have) been the headwind this year like many banks in this monetary tightening cycle we’ve seen more money being put aside for credit provisioning,” Moor said.
“But generally, this is a bank that doesn’t have much in the way of credit losses at all and we would expect that to normalize as we move into next year.”
To watch Moor’s full interview with BNN Bloomberg, click the video above.