Scotiabank profit rise bucks trend

Bank of Nova Scotia (BNS-T55.631.663.08%) reported earnings of $1.1-billion in the fourth quarter, up 21 per cent from a year ago and in line with analyst expectations.

The profit amount to $1 per share, compared to 83 cents in the same period last year, and the bank kept its quarterly dividend unchanged at 49 cents.

Like its peers, Scotiabank’s bottom line this quarter was lifted by its consumer and business banking operations, while its capital markets businesses were a drag on profit compared to a year ago.

Canadian banking contributed $567-million in earnings for the three months ended Oct. 31 (which is the banks’ fiscal year-end), up 13 per cent from a year ago thanks largely to a 9-per-cent increase in the amount of residential mortgages the bank has on its books.

International banking contributed $363-million, up 28 per cent, as a result of acquisitions in Puerto Rico and Thailand as well as lower provisions for bad loans.

But Scotia Capital’s profit fell $80-million to $273-million due to lower trading revenues and fewer loans.

On Oct. 1 Scotiabank changed its structure to carve out a new business unit, global wealth management. The bank has been including its results from wealth management operations in its Canadian and international banking divisions, but going forward it’s going to separate out the performance of its wealth management business (which will also include its insurance operations), which it is dramatically ramping up.

“We recently demonstrated our strong commitment to growth in wealth management with the announcement of our agreement to acquire DundeeWealth,” Scotiabank chief executive officer Rick Waugh states in the company’s earnings release Friday. “I am confident we have everything in place to take advantage of a unique window of opportunity that exists for our bank.”

Andre-Philippe Hardy, an analyst with Royal Bank of Canada who covers the banks, said in a note to clients that Scotiabank’s provisions for credit losses of $254-million were better than he expected. Analysts had been forecasting provisions of $311-million.

Expenses were higher than expected, partly because the bank is spending more on technology and advertising.

Scotiabank’s profit this quarter are its second highest ever.

“While not a stand-out quarter, relative to what we have seen from the Big 5 banks that have reported to date, Scotia’s results will likely be very well received on a relative basis,” said Barclays Capital analyst John Aiken.

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