Net income for the three months ended April 30 climbed 14 percent to a record C$1.8 billion ($1.66 billion), or C$1.39 a share, from C$1.58 billion, or C$1.22, a year earlier, the Toronto-based bank said today in a statement. Adjusted profit, which excludes some items, was C$1.40 a share, topping the C$1.31 average estimate of 13 analysts surveyed by Bloomberg.
Scotiabank, Canada’s third-biggest lender by assets, said it intends to repurchase as many as 12 million shares, or about 1 percent of its outstanding stock, during the next year.
“We had strong results across our business,” Chief Executive Officer Brian Porter, 56, said in a conference call. “Our second-quarter performance reflects particularly strong results in Canadian banking and global wealth and insurance.”
Scotiabank has increased efforts to expand in credit cards and create partnerships as it boosts bets on Canadian consumers. The firm this month agreed to buy 20 percent of the financial-services business of retailer Canadian Tire Corp. and paid C$3.1 billion in 2012 for ING Groep NV (INGA)’s Canadian online bank, later renamed Tangerine.
Revenue increased 10 percent to C$5.75 billion, according to the statement. The lender set aside C$375 million for bad loans, up 9.3 percent from a year earlier.
Profit from Canadian banking rose 11 percent to C$565 million from a year earlier on higher revenue, improving interest margins and “double-digit growth” in credit cards and automotive-lending volumes, the firm said. Toronto-Dominion Bank and Royal Bank of Canada, which last week reported results that beat estimates, also benefited from higher second-quarter profit from Canadian banking.
“Clearly everybody is making a bunch of money in domestic lending,” said David Baskin, who helps manage about C$675 million including Scotiabank shares at Baskin Financial Services in Toronto. “It’s much stronger than anybody expected and the margins are holding up pretty well in spite of the low interest rates.”
International banking profit slipped less than 1 percent to C$463 million as net interest margins narrowed and provisions for credit losses rose. Scotiabank has operations in more than 55 countries, including Chile, Mexico and Thailand.
“We’ve had double-digit lending growth in Latin America, but that’s been muted by this margin compression,” Chief Financial Officer Sean McGuckin said in a telephone interview. “We should be getting double-digit net interest income growth” by the fourth quarter.
Profit from wealth management and insurance rose 11 percent to C$355 million from a year earlier, lifted by higher sales and improving markets. Scotiabank said May 14 that it’ll scale back or sell its 37 percent stake in CI Financial Corp., a Toronto-based money manager it bought in 2008.
The capital from such a sale could go toward acquisitions Scotiabank is considering in areas such as wealth management and retail banking in Mexico, Peru, Chile and Colombia, as well as credit cards in Canada and abroad, Porter said on the call.
“We’re constantly looking at opportunities that come our way but we will remain disciplined,” McGuckin said. “We’re not just going to rush out and buy whatever is there just to use the capital.”
Earnings at Scotiabank’s global banking and markets unit increased 9.4 percent to C$385 million on gains in fixed-income, investment-banking and U.S. corporate-banking businesses. Underwriting and advisory fees advanced 14 percent to C$160 million and trading revenue rose 13 percent to C$425 million.
“We’re well positioned to be meeting all our medium-term financial objectives for 2014,” McGuckin said.
National Bank of Canada, the nation’s sixth-biggest lender, reports results later today.
To contact the reporter on this story: Doug Alexander in Toronto at email@example.com