Scotiabank Beats Profit Estimates as Latin America Gains

  • Canadian lender raises quarterly dividend to 74 cents a share
  • Earnings also boosted by domestic banking, lower provisions

Bank of Nova Scotia posted earnings that beat analysts’ estimates, led by gains in capital markets and international banking. Canada’s third-biggest bank raised its dividend 2.8 percent to 74 cents a share.

Shares of Scotiabank rose as much as 1.8 percent after the Toronto-based lender reported fiscal third-quarter profit excluding some items of C$1.55 a share, beating the C$1.48 average estimate of 15 analysts surveyed by Bloomberg.

“We’re seeing a similar trend to what we’ve seen with the other banks: Credit losses are way below consensus and their capital-markets business is also doing extremely well," said Steve Belisle, a fund manager with Manulife Asset Management whose team manages about C$3 billion ($2.3 billion). “Scotiabank’s international business is now firing on all cylinders, with another quarter of double-digit loan growth.”

Net income for the quarter ended July 31 rose 6.1 percent to C$1.96 billion, or C$1.54 a share, from C$1.85 billion, or C$1.45, a year earlier, the Toronto-based company said Tuesday in a statement.

Capital Markets

Scotiabank had gains across all of its businesses, with capital markets and international banking posting the biggest increases. Chief Executive Officer Brian Porter has been focusing on retail lending in Mexico, Chile, Colombia and Peru to take advantage of their relative economic stability, demographics and growth prospects. The lender has operations in more than 55 countries.

“We are very pleased with continued strong quarterly results in international banking and remain positive about the medium and longer term potential for these markets,” Porter, 58, said in the statement.

Scotiabank rose 1.7 percent to C$70 at 10:10 a.m. in Toronto, leading the eight banks in the S&P/TSX Composite Commercial Banks Index. The shares have gained 25 percent this year, the best performance in the index, which gained 13 percent in the period.

Revenue rose 8.4 percent to C$6.64 billion from a year earlier, eclipsing analysts’ estimates of C$6.61 billion. Scotiabank set aside C$571 million for bad loans, compared with C$752 million in the second quarter. Provisions beat the C$625.8 million average estimate of 10 analysts surveyed by Bloomberg.

Global Banking

The global banking and markets unit had profit of C$421 million, a 12 percent jump from a year earlier, on fatter contributions from fixed income, corporate banking, investment banking and precious metals, the company said. Net income from international banking rose 10 percent to C$589 million, while Canadian banking rose 7.8 percent to C$930 million, lifted by higher net interest margins, an increase in assets and deposits, and contributions from a credit-card portfolio bought from JPMorgan Chase & Co.

“Overall, a solid result punctuated by improving profitability in international and continued momentum in domestic retail," John Aiken, a Barclays Plc analyst, said in a note to clients. “Capital markets benefited to a similar degree as peers."

Scotiabank, which has the most oil-and-gas loans among Canada’s five large lenders, said impaired energy loans in the quarter rose to C$368 million from C$351 million in the second quarter and C$96 million a year earlier. Scotiabank had C$16.1 billion of energy loans as of July 31, down from C$16.3 billion at the end of April.

The company is the fifth of Canada’s six largest lenders to post results, with each one beating estimates. National Bank of Canada is scheduled to report Wednesday.

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