Scotiabank Profit Increases 9.6% as ING Direct Adds

Bank of Nova Scotia, Canada’s third-biggest lender by assets, said second-quarter profit rose 9.6 percent on contributions from its takeover of ING Groep NV’s business in the country. Results missed analysts’ estimates.

Net income for the period ended April 30 climbed to C$1.6 billion ($1.55 billion), or C$1.23 a share, from C$1.46 billion, or C$1.15, a year earlier, the Toronto-based lender said today in a statement. Revenue advanced 11 percent to C$5.22 billion.

Earnings from Canadian banking rose 19 percent, aided by Scotiabank’s C$3.1 billion purchase of ING Direct Canada in November, which added about 1.8 million customers using products such as high-interest savings accounts, checking accounts and mortgages.

“Bank of Nova Scotia’s weak spot in the past was their perceived absence of Canadian retail deposits, and with ING they addressed that in one stroke,” Gavin Graham, chief strategy officer at Integris Pension Management Corp., said in a telephone interview from Toronto.

Scotiabank said it earned C$1.24 a share excluding some items, missing the C$1.26 average estimate of 15 analysts surveyed by Bloomberg. Provisions for credit losses were higher than some analysts estimated, as the bank set aside C$343 million for bad loans, 30 percent more than a year earlier.

Bears, Bulls

“There are issues for both bears and bulls to feast on,” John Aiken, an analyst with Barclays Plc, said in a note that cited rising provisions as one negative. “This is more than offset by the growth in lending, margins and earnings within its international banking operations, as well as the contribution that the ING acquisition is having.”

Scotiabank was unchanged at C$59.61 at 4 p.m. in Toronto. The shares have climbed 3.7 percent this year, the third-best performer on the eight-company Standard & Poor’s/TSX Commercial Banks Index.

Domestic consumer-banking profit rose to C$547 million from C$461 million a year earlier, lifted by the ING Direct takeover.

“Canadian banking had a very good second quarter,” Chief Executive Officer Richard Waugh, 65, said in the statement. “There was strong asset growth across most businesses, as well as a solid contribution from ING.”

International Banking

Profit at Scotiabank’s international banking unit advanced

5.1 percent to C$471 million and its wealth-management and insurance unit climbed 12 percent to C$335 million. The lender’s global banking and markets investment-banking unit’s earnings fell 6.7 percent to C$361 million as trading revenue declined and expenses rose.

“We expect growth in the United States to favorably impact our Americas footprint,” Waugh said in an investor conference call. “Expanded U.S. trade with Canada and Mexico, in particular, will benefit our customers and business conditions.”

The bank is “well positioned and confident” it will meet or exceed financial targets for the year, Waugh said.

Scotiabank is Canada’s third lender to report second-quarter results. Last week, Toronto-Dominion Bank missed analysts’ estimates by a penny after posting profit that climbed

1.8 percent to C$1.72 billion. Montreal-based National Bank of Canada beat estimates as net income fell 22 percent to C$434 million.

Bank of Montreal, the fourth-largest lender, reports results tomorrow, followed by Royal Bank of Canada, the biggest bank, and Canadian Imperial Bank of Commerce, the No. 5 lender, on May 30.

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