Bank of Nova ScotiaBNS-T -0.79%decrease reported second-quarter profit that beat analyst expectations but fell from the same period last year as the lender set aside more money for loans that could default, offsetting a boost from its capital markets and wealth divisions.
Scotiabank earned $2.09-billion, or $1.57 per share, in the three months that ended April 30. That compared with $2.15-billion, or $1.68 per share, in the same quarter last year.
Adjusted to exclude certain items, including income tax expenses from the Canada Recovery Dividend, Scotiabank earned $1.58 per share. That edged out the $1.55 per share analysts expected, according to S&P Capital IQ.
“The bank delivered solid results this quarter against a backdrop of ongoing macroeconomic uncertainty, reporting positive operating leverage driven by revenue growth and continued expense discipline. We are executing on our commitment to balanced growth as our deposit momentum continues, while maintaining strong capital and liquidity metrics,” Scotiabank chief executive officer Scott Thomson said in a statement. “I am proud to see Scotiabankers across our global footprint rallying behind our new strategy and coming together to drive our key strategic initiatives forward.”
In December, Scotiabank launched its new strategic plan aimed at growing its deposit base to reduce its funding costs and target businesses in North America, where it believes it can boost growth.
The bank kept its quarterly dividend unchanged at $1.06 per share.
Scotiabank is the second major Canadian bank to report earnings for the second quarter. Toronto-Dominion Bank posted second-quarter results Thursday that beat analysts’ estimates. Royal Bank of Canada, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada release earnings result later this week.
In the quarter, Scotiabank set aside $1.01-billion in provisions for credit losses – the funds banks set aside to cover loans that may default. That included $975-million against loans that the bank believes may not be repaid, based on models that use economic forecasting to predict future losses.
In the same quarter last year, Scotiabank set aside $621-millions in provisions.
Total revenue rose 5 per cent in the quarter, to $8.35-billion on higher margins, wealth revenues, underwriting and advisory fees and banking fees. Expenses increased 3 per cent to $4.71-billion, which the bank said was driven higher technology and staffing costs.
Profit from Canadian banking was $1.01-billion, down 4 per cent from a year earlier as higher provision for credit losses and non-interest expenses offset higher revenues.
Profit from the bank’s international division was up 6 per cent at $671-million as higher net interest income and the positive impact of foreign currency exchange offset a climb in provision for credit losses, non-interest expenses, provision for income taxes and lower non-interest income.
The global wealth management division generated $380-million of profit, up 8 per cent on higher brokerage revenues in Canada and higher mutual fund fees in the international wealth segment, particularly in Mexico.
And capital markets profit rose 7 per cent to $428-million as higher non-interest income and lower provision for credit losses and provision for income taxes offset by higher expenses and lower net interest income.
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