Scotiabank profit beats forecasts on lower loan-loss provisions, gains in retail banking - The Globe and Mail

A woman leaves a Scotiabank branch, in Ottawa, on May 31, 2016.

Chris Wattie/Reuters

Bank of Nova Scotia’sthird-quarter profit was larger than analysts expected, driven by lower provisions for losses on loans and improving earnings from retail banking in Canada and Latin America.

The country’s third-largest bank was the first major lender to report earnings for the quarter that ended July 31. Scotiabank earned $2.54-billion, or $1.99 per share, compared with $1.3-billion, or $1.04 per share, in the same quarter a year ago.

Adjusted to exclude certain items, Scotiabank said it earned $2.01 per share, well ahead of the consensus estimate among analysts of $1.90 per share.

Revenue was up 1 per cent to $7.76-billion and expenses also increased 1 per cent to $4.1-billion.

Provisions for credit losses, which are the funds banks set aside to cover loans that may default, fell to $380-million from $2.2-billion a year earlier. The bank recovered $461-million in provisions that had been set aside earlier in the pandemic in case loans that were still performing went sour, as economic forecasts have improved. The bank also earmarked $841-million to cover loans that are past due.

Profit from Canadian banking increased to $1.08-billion, compared with $429-million a year ago. The difference was mostly in provisions for credit losses, as the bank was building its reserves substantially a year ago and is now recovering some of those funds after few loans defaulted. But revenue was also driven by stronger residential mortgage and commercial lending, which increased 10 per cent and 7 per cent respectively.

International banking profit was $486-million, continuing to recover after a slow start to the year. Provisions for credit losses were lower than a year ago, but revenue also declined by 8 per cent year over year as income from interest fell.

Profit from global banking and markets was $513-million, lower than the previous quarter after a series of strong results. And wealth management profit was $392-million, up 22 per cent from a year ago because of higher mutual fund fees and brokerage revenues.

Scotiabank kept its quarterly dividend unchanged at 90 cents per share, as Canada’s banking regulator is still prohibiting dividend increases and share buybacks.

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Scotiabank profit beats forecasts on lower loan-loss provisions, gains in retail banking - The Globe and Mail
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