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Scotiabank was the first of the Big Six banks to report second-quarter earnings on Wednesday.Sammy Kogan/The Globe and Mail
Bank of Nova Scotia BNS-T reported higher second-quarter profit that beat analysts’ estimates on a boost from its Canadian banking unit as the lender seeks to bolster its profitability.
Scotiabank earned $2.6-billion, or $2.00 per share, in the three months that ended April 30. That compared with $2-billion, or $1.48 per share, in the same quarter last year.
Adjusted to exclude certain items, the bank said it earned $2.02 per share. That edged out the $1.93 per share analysts expected, according to data from Bloomberg.
“The Bank delivered another strong quarter as we continue to execute on our strategy, with strong revenue growth coupled with expanding margins and another quarter of positive operating leverage,” Scotiabank chief executive officer Scott Thomson said in a statement.
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Mr. Thomson has said he expects double-digit earnings per share growth in its domestic banking business this year. The unit is key to Scotiabank’s plan to boost its profitability.
Last quarter, Scotiabank said it expects to hit its target of 14-per-cent return on equity in 2027, a year earlier than expected.
In the second quarter, Scotiabank posted an adjusted return on equity of 13.2 per cent.
While the bank’s turnaround strategy is focused on building its Canadian business, it also hinges on improving its international unit and growing its capital markets division in the United States.
The bank raised its quarterly dividend by 4 cents to $1.14 per share.
Scotiabank is the first major Canadian bank to report earnings for the fiscal second quarter. Bank of Montreal and National Bank of Canada also report earnings on Wednesday. Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will post earnings on Thursday.
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In the quarter, Scotiabank set aside $1.2-billion in provisions for credit losses – the funds banks set aside to cover loans that may default. That was higher than analysts anticipated, and included $1.1-billion against loans that the bank believes may not be repaid, based on models that use economic forecasting to predict future losses.
In the same quarter last year, Scotiabank set aside $1.4-billion in provisions.
Total revenue rose 8 per cent in the quarter to $9.8-billion. But expenses increased 2 per cent to $5.2-billion, which the bank said was driven by higher staffing, technology, advertising and business development costs.
Profit from Canadian banking was $935-million, up 53 per cent from a year earlier on higher revenues and lower provision for credit losses on performing loans. Loan balances rose slightly by 3 per cent year over year.
Profit from the bank’s international division rose 1 per cent to $701-million, driven by lower non-interest expenses and income taxes, partially offset by lower net interest income, lower non-interest income and higher provision for credit losses.
The global wealth management division generated $474-million of profit, up 19 per cent, driven by higher mutual fund fees, brokerage revenues and net interest income from the Canadian wealth business.
Capital markets profit rose 11 per cent to $457-million, driven by higher non-interest income and net interest income, which was partially offset by higher non-interest expenses.
