Bank of Nova Scotia BNS-T posted first-quarter earnings that topped analyst expectations on lower-than-expected provisions for sour loans, even as profit slumped as the lender rejigged its international business.
Scotiabank earned $993-million or 66 cents per share in the three months that ended Jan. 31. That compared with $2.2-billion or $1.68 per share in the same quarter last year.
On an adjusted basis, including impairment costs related to the sale of certain banking operations in Latin America, the bank’s profit climbed 7 per cent to $2.4-billion from a year prior, or $1.76 per share. That edged out the $1.65 per share analysts expected, according to Refinitiv.
As part of its strategic turnaround plan, Scotiabank has been reallocating capital from its businesses in Latin America to Canada and the U.S. In January, the bank announced that it is selling its operations in Colombia, Costa Rica and Panama to Colombian bank Davivienda. The sale resulted in an impairment cost of $1.4-billion, which weighed on the bank’s reported net income.
The bank also completed its acquisition of a 14.9 per cent stake in U.S.-based bank KeyCorp in December.
“Our results this quarter demonstrate the value of our diversified franchise and continued focus on deepening relationships with clients across our footprint,” Scotiabank chief executive officer Scott Thomson said in a statement.
The bank kept its quarterly dividend unchanged at $1.06 per share.
Scotiabank is the first major Canadian bank to report earnings for the fiscal first quarter. Bank of Montreal also reported earnings Tuesday. National Bank of Canada will post earnings on Wednesday. Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will close out the week for major bank earnings on Thursday.
In the quarter, Scotiabank set aside $1.2-billion in provisions for credit losses – the funds banks reserve to cover loans that may default. That was slightly higher than analysts anticipated, and included $98-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 had set aside $962-millions in provisions.
Total revenue increased 11 per cent in the quarter to $9.4-billion. But expenses jumped 37 per cent to $6.5-billion, which the bank said was driven by performance expenses, as well as higher technology and personnel costs.
Profit from Canadian banking was $913-million, down 6 per cent from a year earlier as higher provision for credit losses and expenses offset a boost in revenue. But loan balances were up 3 per cent year over year, and deposits grew 6 per cent.
Profit from the bank’s international division fell 9 per cent to $651-million as lower net interest income, as well as higher provision for credit losses and income taxes offset a rise in non-interest income and lower expenses.
The global wealth management division generated $407-million of profit, up 23 per cent on higher mutual fund fees, brokerage revenues, and net interest income across the Canadian and International wealth businesses.
And capital markets profit climbed 33 per cent to $517-million on higher net interest income and non-interest income.