Bank of Nova Scotia beats earnings expectations - The Globe and Mail

Bank of Nova Scotia reported a higher second-quarter profit boosted by lower loan loss provisions and improving returns from its Canadian banking division.

For the three months that ended April 30, Scotiabank earned $2.46-billion in profit, or $1.88 per share, compared with $1.32-billion, or $1 per share, in the same quarter last year.

Adjusted to exclude some items, Scotiabank said it earned $1.90 per share. On average, analysts expected earnings per share of $1.77, according to Refinitiv.

Revenue fell 3 per cent to $7.74-billon, as the bank’s lending margins decreased by 9 basis points year over year. (100 basis points equal one percentage point).

As with other major Canadian banks that reported earnings last week, Scotiabank benefitted from a continuing drop in provisions for credit losses - the funds set aside to cover loans that may default. The bank recorded $496-million in provisions, compared with $1.85-billion in the same quarter last year.

The bank recovered $696-million in provisions that had previously been earmarked in case loans that were still current turned sour. That helped offset a rise in provisions for loans that were already past due, which climbed to $1.2-billion, driven by rising write-offs in the bank’s international division.

While Scotiabank posted good performance in Canada, its international arm - which is concentrated in Mexico, Peru, Chile and Colombia - is “still catching up,” said Gabriel Dechaine, an analyst at National Bank Financial Inc., in a note to clients.

Profit from Canadian banking increased to $931-million, up 95 per cent from the same quarter last year. Higher fee income and an 8-per-cent increase in mortgage balances helped boost returns, while business loans increased by 4 per cent.

Scotiabank’s international banking arm reported profit of $429-million, up from $173-million a year ago, as loan loss provisions fell sharply. But revenues declined by 6 per cent and margins contracted by 33 basis points, while countries including Peru and Chile face public health and political challenges.

Profit from global banking and markets decreased by 1 per cent after the bank closed its metals business, ScotiaMocatta. But the division had strong performance in equities markets and the bank said it has a good pipeline of advisory work for the rest of the year.

Profit from wealth management was up 25 per cent to $378-million, as assets under management increased 19 per cent and higher fees helped push revenue up 16 per cent.

The bank kept its dividend unchanged at 90 cents per share, as Canada’s banking regulator maintains a temporary ban on dividend increases and share buybacks.

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2021-06-01 11:24:44Z
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