Scotiabank Falls as Overseas Lending Misses Estimates

Bank of Nova Scotia fell the most in seven months after third-quarter profit from international lending missed some analysts’ estimates.

Scotiabank slid 2.1 percent to C$72.67 at 10:48 a.m. in Toronto trading, the most since Jan. 27 and the worst performance in the eight-company Standard & Poor’s/TSX Commercial Banks Index. The lender today reported record profit of C$2.35 billion ($2.14 billion), or C$1.85 a share, for the period ended July 31, fueled largely by a C$555 million gain from selling its stake in Toronto-based money manager CI Financial Corp.

“We view BNS’s earnings results as disappointing as they fell short of our expectations in all segments other than wholesale banking,” Darko Mihelic, an analyst with RBC Capital Markets, said in a note to investors.

Earnings at Scotiabank, with operations in more than 55 countries, were muted by its third straight quarter of declining profit at its international banking business. The unit’s earnings slid 16 percent to C$452 million, pulled down by weaker results in the Caribbean and Central America, the bank said today in a statement. Mihelic’s estimate was C$489 million.

Canadian bank earnings rose 2.7 percent to C$565 million, compared with Mihelic’s estimate of C$586 million. Profit from global wealth management and insurance more than doubled to C$846 million. Excluding the CI gain, Scotiabank’s wealth-management profit was C$321 million, Mihelic said, missing his C$359 million estimate.

‘Many Issues’

Global banking and markets, which encompasses investment banking, rose 7.9 percent to C$408 million from a year earlier. Underwriting and advisory fees advanced 61 percent to C$217 million.

“While Scotia’s headline earnings and dividend increase are in line with expectations, there are just too many issues in the quarter to feel positive,” said John Aiken, an analyst with Barclays Plc in Toronto. “The performance in international was somewhat mixed, although likely disappointed against expectations.”

Scotiabank raised its quarterly dividend to 66 cents a share from 64 cents, joining Royal Bank of Canada in boosting its payout for the second time in a year.

Bank of Montreal today topped analysts’ estimates after posting record profit of C$1.13 billion, or C$1.67 a share, on gains in consumer lending and investment banking. Adjusted per-share earnings were C$1.73, the bank said, beating the C$1.66 average estimate of 15 analysts surveyed by Bloomberg.

‘Balanced Quarter’

“Pretty good, balanced quarter from BMO,” Jason Bilodeau, an analyst with Macquarie Capital Markets in Toronto, said in a note to clients, referring to the company by its stock symbol. “The composition looks favorable as well, with in line or better-than-expected numbers in each of the segments.”

Bank of Montreal (BMO) rose 0.8 percent to C$82.48 in Toronto trading.

The lender set aside C$130 million for bad loans, up from C$76 million a year earlier, when higher recoveries and improvements in personal and commercial lending helped the lender post its lowest provision for credit losses since 2007.

Canadian personal and commercial banking profit rose 8.2 percent to C$526 million, the Toronto-based firm said in a statement, while earnings at BMO Harris Bank climbed 6.7 percent to C$159 million.

Profit from the bank’s BMO Capital Markets’ unit rose 14 percent to C$306 million from C$268 million a year earlier. Underwriting and advisory fees advanced 69 percent to C$238 million.

The wealth-management unit, which includes insurance, posted profit of C$190 million, down 12 percent from C$217 million a year earlier as insurance earnings slid.

National Bank of Canada (NA), based in Montreal, reports results tomorrow, followed by Toronto-Dominion Bank, the country’s largest lender, and Canadian Imperial Bank of Commerce on Aug. 28.

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 Steven Crabill, Steve Dickson

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