After increasing its dividend by four cents in its second quarter, the bank held it steady in the third quarter at $1.10 per share.CARLOS OSORIO/Reuters
Bank of Nova Scotia BNS-T posted a higher fiscal third-quarter profit than expected and metrics that signal that continuing uncertainty over tariffs has begun to ease, with fewer loan-loss provisions and boosted fixed income trading.
Scotiabank, along with Bank of Montreal, opened the sector’s quarterly earnings season on Tuesday, posting a profit of $2.53-billion, compared with $1.91-billion in the same quarter last year. That was stronger than expectations, which had already anticipated that it, as well as the other Big Six Canadian banks, would post higher earnings.
That translates to $1.84 a share for the three months that ended July 31, up from $1.41 a share a year earlier.
Adjusted to exclude items, Scotiabank said it earned $1.88 a share. Analysts surveyed by S&P Capital IQ were expecting a profit of $1.73 a share.
Scotiabank’s stock price surged to a high of $84.26 per share on Tuesday. It was up by 4.8 per cent as of early Tuesday afternoon.
Scotiabank reported lower loan-loss provisions, or money it sets aside to cover soured loans, which dropped to $1.04-billion, down $11-million from a year earlier.
Overall provisions dropped by $357-million from the second quarter, following a conservative outlook on credit as banks held their breath over uncertainty about U.S. tariffs.
“If I look at where we are now versus where we were last quarter: some big improvements, particularly on the retail side,” Phil Thomas, Scotiabank chief risk officer, said during an analyst call Tuesday morning.
“I’m encouraged by the trends, however I don’t think the worst has necessarily passed us and I think we still need to be very thoughtful about the macroeconomic dynamic.”
While overall impaired provisions are trending down from past quarters, the bank reported $447-million for provisions for impaired domestic banking loans, or loans that are past due, a 32-per-cent increase from a year ago.
“There’s obviously a lot going on in the Canadian economy, particularly, we still have trade uncertainty that’s hitting us; Canadian consumers still showing some signs of stress,” Mr. Thomas said.
In its Canadian arm, lowered provisions in the retail sector were somewhat offset by higher commercial provisions, as the commercial sector cycles comes down from a recently positive environment.
The bank had lower provisions for performing loans, or loans that are still in good standing but that the bank expects will be late, because of changes in credit quality in its commercial and retail portfolios.
Scotiabank’s fixed-income trading desk in its global banking arm posted revenue of $432-million, up from $233-million a year earlier.
The division benefited from a “volatile trading environment and robust equity markets” alongside a strong year for investment banking, according to Travis Machen, CEO and group head of global banking and markets. This was partly because of less hesitancy over tariffs and rising confidence among businesses.
Mr. Machen said it’s difficult to replicate that strength every quarter but “we’re definitely building a durable franchise where we think this will be more of the norm.”
Scotiabank held its quarterly dividend steady at $1.10 cents per share, after a 4-cent increase in its second quarter.
Earnings in Scotiabank’s key Canadian banking operations fell 2 per cent in its latest quarter to $958-million, when compared with last year, while capital markets earnings rose by 29 per cent to $473-million.
Net income attributable to shareholders in its wealth-management arm, meanwhile, increased 14 per cent to $417-million.