Bank of Nova Scotia reported a 30% surge in profits Tuesday, closing out a quarter that saw Canada’s five biggest banks beat expectations, largely thanks to lower than anticipated credit costs.

But concerns about future loan growth in Canada persist, as high house prices and overstretched borrowers have dampened investor sentiment.

Combined, the five big banks, including Royal Bank of Canada, Toronto-Dominino Bank, Bank of Montreal and Canadian Imperial Bank of Commerce — had $9.67 billion in net income during the second quarter, up nearly 20% from $8.12 billion a year ago.

Their combined quarterly revenue was $34.80 billion, up 5% from $33.11 billion during the second quarter of 2016.

There was no indication in the results that Canadians are having trouble servicing their mortgages, credit card debts or other types of loans, Barclays analyst John Aiken said.

But while credit trends look solid, analysts said the growth outlook for the lenders’ key Canadian retail banking operations remains challenged in light of record levels of household debt and overheated house prices in Toronto and Vancouver.

The second quarter of the year saw “positive but not spectacular” Canadian loan growth for the banking sector, Aiken said.

“And unfortunately on the Canadian front we’re still seeing margin compression, really just due to the low interest rate environment,” Aiken said.

The biggest negative coming out of the quarter was retail banking growth south of the border, which was not as strong as everyone had been expecting, Aiken said.

“We did see margin expansion benefiting from rising Fed rates, but loan growth just did not exist,” Aiken said.

“Considering the fact that the U.S. banking operations are expected to grow faster than the Canadian banking operations, this is a bit of a disappointment.”

Scotiabank doesn’t have a significant retail banking presence in the U.S., but the bank did benefit from strong growth in its international banking division, which grew its second-quarter net income by 19% to $595 million.

That’s in contrast to its Canadian banking operations, which had $971 million of net income, down 1% from a year ago.

James O’Sullivan, Scotiabank’s group head of Canadian banking, said he’s optimistic about the bank’s ability to grow its Canadian banking division.

“With each passing month over the past several months our macro-economic view of Canada has been getting more and more favourable,” O’Sullivan said.

“So our outlook for the Canadian banking division would very much be for solid growth.”

O’Sullivan made his comments after the bank reported that it boosted its second-quarter net income to $2.06 billion from $1.58 billion a year ago.

Scotiabank’s second-quarter earnings amounted to $1.62 per share, up from $1.23 per share during the second quarter of 2016.

The bank had $6.58 billion of revenue during the three-month period ended April 30, compared with $6.59 billion a year ago.

During a conference call to discuss the bank’s quarterly results, chief risk officer Daniel Moore downplayed concerns about how the housing market could impact the bank’s loan books.

“Our Canadian residential mortgage portfolio of $197 billion is high quality, with 54% of the portfolio insured,” said Moore.

“Of the uninsured, our portfolio has an (loan-to-value ratio) of 51%, providing a substantial equity buffer in the event of a housing correction, something which we are not forecasting.”

He said the bank’s stress tests show “negligible” housing-related losses in the event that home prices drop by as much as 50% in Toronto and Vancouver and unemployment rates rise by levels similar to those seen in previous recessions.

Losses in the bank’s portfolio of unsecured loans would be higher in such a scenario but still “very manageable,” said Moore.