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Scotiabank’s Caribbean setback signals growing sore spot for Canada’s big banks

Scotiabank’s Caribbean setback signals growing sore spot for Canada’s big banks

Posted by Shanelle Weir on November 05, 2014

Trouble in the Caribbean is becoming a popular refrain on Bay Street these days: The Bank of Nova Scotia is the latest to suffer, announcing it will write down more than $100-million in loans related to its hospitality portfolio in the region.

The charge, which was part of a bigger package of impaired charges announced by the bank Tuesday, follows on the heels of an even bigger one suffered by Canadian Imperial Bank of Commerce’s First Caribbean subsidiary earlier this year and further underlines a persistent weak spot in the international growth prospects of the country’s Big 6 banks.

“They’re not running away from the Caribbean, but they’re certainly not expanding there,” said Craig Ellis, a portfolio manager at Bellwether Investment Management Inc. “For most of the banks, it’s now simply about trying to reduce their cost structures there.”

Canadian banks have long been dominant players in the Caribbean, with Royal Bank of Canada, CIBC and Scotiabank accounting for close to 60% of bank assets in the region.

It was a lucrative place to do business in the early 2000s, but many countries including islands such as Jamaica and Barbados have not fully recovered from the financial crisis, leaving economies there burdened by high unemployment and rising debt.

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