Bank of Nova Scotia profit beats estimates on provisions; capital markets, overseas unit sluggish

Bank of Nova Scotia (BNS.TO) (Scotiabank) wrapped up Canadian banks’ quarterly results reporting on Tuesday, beating analysts’ estimates, thanks to fewer-than-expected provisions to cover loan losses and an increase in domestic loan growth.

But Scotiabank’s global banking and markets unit posted a slight profit decline, the only one of Canada’s six biggest banks to do so.

And pre-tax, pre-provisions (PTPP) earnings rose a muted 3% from a year ago, as a decline in its Pacific Alliance-focused international banking unit offset an increase in Canada, where business lending expanded more than rivals’ at about 4% from a year earlier.

Scotiabank shares fell 1.1% to C$80.30 in morning trading in Toronto, after hitting a three-year intraday high earlier. The Toronto stock benchmark (.GSPTSE)rose 1.25%.

Canada’s No. 3 lender reported adjusted net income of C$1.90 a share in the three months ended April 30, from C$1.04, a year earlier. Analysts had expected C$1.76 a share, based on IBES data from Refinitiv.

Canada’s six biggest lenders have reported better-than-expected earnings driven by strong capital markets and wealth management, and lower provisions than analysts had predicted, as a raft of government and bank measures since the start of the coronavirus pandemic helped keep a lid on soured loans.

The lender took provisions for credit losses of C$496 million, down from C$1.8 billion a year earlier.

While that included a recovery of about C$696 million of provisions on performing loans, Scotiabank set aside nearly C$1.19 billion to cover higher retail loan write-offs in its Latin American operations. Executives said on the call that these have peaked.

Scotiabank expects overseas loan growth to improve in the second half, with 10% expansion “very likely” in 12 to 18 months, Chief Executive Brian Porter said on an analyst call.

($1 = 1.2052 Canadian dollars)