Scotiabank Says Stronger Results in Most Divisions Send Profits Up 14%

Trend continues of banks beating earnings expectations
By The Canadian Press
The Canadian Press
The Canadian Press
May 28, 2014 Updated: May 28, 2014

TORONTO—Widespread growth at Scotiabank helped profits climb 14 percent in the second quarter, as the bank benefited from improved domestic results as well as global wealth and insurance.

Scotiabank reported Tuesday that it made $1.8 billion or $1.39 per share, compared with $1.58 billion or $1.22 a share in the same quarter of 2013.

Adjusted earnings of $1.40 per share beat analysts’ estimates by nine cents, according to figures from Thomson Reuters.

The results make Scotiabank the third big Canadian bank to surge past expectations for the quarter on the back of improvement in its core operations. 

Royal Bank and TD Bank also posted healthy profits and beat expectations last week with the help of stronger wealth management results.

“Overall, I’m pleased with the first half of the year and I expect our growth to continue to accelerate throughout 2014,” said Scotiabank president and CEO Brian Porter in a conference call with analysts.

Scotiabank shares lifted to all-time highs of $69.07 early in the trading session on Tuesday.

Total revenue rose to $5.7 billion from $5.3 billion in the same quarter last year while return on equity was 16.3 percent, down from 16.5 percent.

In the Canadian banking division, net income grew to $565 million from $507 million, helped by double-digit growth in both credit card and automotive lending volumes.

The provision for credit losses was $375 million, up $32 million from the same period last year. The bank said the year-over-year increase was primarily due to higher provisions in its international segment.

Those provisions affected the overall profits of the international banking which slipped to $416 million from $415 million.

Global and wealth insurance operations delivered net income of $345 million from $310 million from favourable market conditions.

Barclays analyst John Aiken called it an impressive quarter for Scotiabank, well ahead of expectations, but he said the uptick in provision for credit losses may be an issue for some investors.

“Scotia continued the pattern of better than anticipated results for the Canadian banks. However, its approach was decidedly different than what investors saw with Royal and TD last week,” Aiken said.

“Scotia’s bottom line did not benefit from better than anticipated credit quality. In fact, it saw some modest deterioration in domestic credit quality and incurred higher provisions in the Caribbean, driving up the total for International, despite moderation in Latin America.”