Scotiabank’s first-quarter profit hits $2.2-billion even as loan-loss provisions rise

Bank of Nova Scotia BNS-T -0.61%decrease booked higher reserves for loans that could default even as a rise in first quarter profit beat analyst estimates.

Scotiabank earned $2.2-billion, or $1.68 per share, in the three months that ended Jan. 31. That compared with $1.76-billion, or $1.35 per share, in the same quarter last year.

Adjusted to exclude certain items, the bank said it earned $1.69 per share. That edged out the $1.61 per share analysts expected, according to Refinitiv.

In the quarter, Scotiabank set aside $962-million in provisions for credit losses – the funds banks set aside to cover loans that may default. That was higher than analysts anticipated, and included just $20-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses. In the same quarter last year, Scotiabank set aside $638-millions in provisions.

“The Bank delivered solid earnings this quarter driven by strong revenue growth, margin expansion and expense discipline,” Scotiabank chief executive officer Scott Thomson said in a statement. “I am encouraged by the early progress against our strategic priorities, and the further strengthening of our balance sheet metrics.”

Scotiabank is the first major Canadian bank to report earnings for the fiscal quarter. Bank of Montreal is also releasing its financial results Tuesday morning. Royal Bank of Canada and National Bank of Canada will release their results on Wednesday and Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will close out the week on Thursday.

Total revenue rose 6 per cent in the quarter to $8.4-billion as expenses also climbed 6 per cent to $4.7-billion.

Profit from Canadian banking was $1.1-billion, up 1 per cent from a year earlier as revenue rose on higher net interest margins. But loan balances were down 1 per cent year over year as mortgages slumped 5 per cent.

Profit from the bank’s international division was up 16 per cent to $746-million as a boost in revenue offset higher provisions for credit losses.

The global wealth management division generated $368-million of profit, down 4 per cent on higher mutual fund fees and lower expenses. And capital markets profit fell 15 per cent to $439-million as revenue slumped on lower net interest income.