Scotiabank Profit Rises 6.5% on Wealth, Canadian Lending

Bank of Nova Scotia, Canada’s third-biggest lender by assets, said fiscal first-quarter profit rose 6.5 percent on higher earnings from wealth management and domestic consumer lending. The company increased its dividend 3.2 percent to 64 cents.

Net income for the quarter ended Jan. 31 climbed to C$1.71 billion ($1.54 billion), or C$1.32 a share, from C$1.61 billion, or C$1.24, a year earlier, the Toronto-based bank said today in a statement. Adjusted earnings, which exclude some items, were C$1.34 a share, matching the average estimate of 11 analysts surveyed by Bloomberg. Revenue rose 9.2 percent to C$5.65 billion.

Scotiabank joins Canada’s other big banks in posting profit that matched or exceeded expectations, aided by wealth management gains and contributions from acquisitions. Scotiabank, the last of the large lenders to report first-quarter results, followed Toronto-Dominion Bank (TD), Canadian Imperial Bank of Commerce and Royal Bank of Canada in boosting its quarterly payout.

“This is solid performance for the Canadian banks,” said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc., whose firm manages about C$4.7 billion including bank shares. “People have high expectations of the banks and they did meet those expectations. Steady as she goes, is the way to say it.”

Bad Loans

Scotiabank rose 9 cents to C$63.12 at 4 p.m. in Toronto. The shares advanced 3.7 percent in the past year, trailing the 12 percent return of the eight-company Standard & Poor’s/TSX Commercial Banks Index.

The lender set aside C$356 million for bad loans, up 15 percent from a year earlier, according to the statement.

Canadian banking earnings rose 6.7 percent to C$575 million and posted growth in credit card and automotive lending volumes, the firm said. The lender also benefited from contributions from its C$3.1 billion purchase of an online banking platform from ING Groep NV (INGA) in November 2012, which added about 1.8 million customers and bolstered loans.

International banking profit fell 4.1 percent to C$442 million on lower net interest margins, higher provisions for credit losses and increased operating costs. Scotiabank has operations in more than 55 countries, including Chile, Mexico and Thailand.

International Struggles

“The international division continues to struggle with loan losses and a high expense load,” Darko Mihelic, an analyst with RBC Capital Markets, said in a note to investors. “In the current environment of concern regarding emerging markets and slowing consumer loan growth in Canada, we believe these results will do little to contain those fears in the shorter term.”

Earnings from the bank’s global wealth-management and insurance unit advanced 16 percent to C$340 million, lifted by higher wealth-management fees, improving markets and acquisitions in Colombia and Peru.

Global banking and markets fell 13 percent to C$339 million from a year earlier, fueled largely by a decline in its fixed-income business, the bank said. Trading revenue fell 5.2 percent to C$402 million, while underwriting and advisory fees rose 55 percent to C$166 million.

(Scotiabank will hold an investors call to discuss quarterly results at 8 a.m. Toronto time, at +1-800-814-4859 or at the Investor Relations section at www.scotiabank.com)

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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