Topic: How To Invest

What is Pat’s commentary for the week of October 3, 2023

Article Excerpt

Since March 2022, the Bank of Canada has raised its benchmark interest rate 10 times, from just 0.25% to 5.0%. The rapid increase is meant to counter rising inflation in the wake of the COVID-19 pandemic and related supply chain disruptions. So far, the plan is working: Canada’s inflation rate has dropped from its peak of 8.1% in 2022 to 4.0% in August 2023. While rising interest rates let banks earn higher interest on their loans, accounting rules also force banks to set aside more funds to cover any rise in loan defaults as borrowers face those higher interest payments. Concerns over a possible spike in loan writeoffs help explain why Bank of Nova Scotia’s shares have dropped 35% since the start of 2022. However, the bank’s new CEO Scott Thomson recently announced several new initiatives to spur growth. Those include increasing Bank of Nova Scotia’s deposit base (which will help cut its funding costs) and boosting its efficiency by getting more…