Scotiabank Lifts Canadian Bank Stocks After Beating Estimates

  • Lender's shares gain the most in six weeks in Toronto trading
  • Bank of Nova Scotia raised its quarterly divided 2.9%

Bank of Nova Scotia led Canadian lenders higher after posting fiscal first-quarter profit that beat analysts’ estimates and raising its quarterly dividend 2.9 percent.

Scotiabank jumped 4.4 percent to C$57.14 at 11:31 a.m. in Toronto, the most intraday since Jan. 19 and the best performance in the Standard & Poor’s/TSX Composite Commercial Banks index, which climbed 2.3 percent. The shares have gained 2.1 percent this year, compared with the 2.2 percent decline of the eight-company index.

Net income for the period ended Jan. 31 rose 5 percent from a year earlier to C$1.81 billion ($1.35 billion), or C$1.43 a share, fueled by gains in international banking and Canadian lending. Profit excluding some items was C$1.44 a share, compared with the C$1.42 average estimate of 15 analysts surveyed by Bloomberg.

Scotiabank joined Bank of Montreal, National Bank of Canada and Canadian Imperial Bank of Commerce in posting profit that topped estimates, even after recording higher lending provisions and impaired loans to the troubled oil-and-gas industry.

‘The Pitfalls’

“Despite a huge oil-related shock, the Canadian banks as a whole continue to tout their ability to navigate the pitfalls through a combination of strong underwriting and offsetting growth beyond the oil-producing regions," Meny Grauman, a Cormark Securities Inc. analyst, said in a note to clients.

Canadian banks collectively set aside C$259 million in provisions for the oil-and-gas industry in the quarter, more than the C$215 million reserved for all of 2015, according to company disclosures.

For Scotiabank, higher soured oil-and-gas loans helped fuel a 16 percent increase in total provisions to C$539 million, the firm said. Still, the Toronto-based bank lifted revenue 8.6 percent to C$6.37 billion from a year earlier, and raised its quarterly dividend to 72 cents a share from 70 cents.

Earnings from international banking, which includes wealth management and insurance overseas, rose 21 percent to C$505 million from a year earlier, Scotiabank said. The lender has operations in more than 55 countries.

Canadian banking profit, which includes domestic wealth management and insurance, increased 7.4 percent to C$875 million. Global banking and markets posted net income of C$366 million, down 9.4 percent, on higher provisions and lower investment-banking fees.

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