Scotiabank 1Q Earnings Up More Than Expected

By Robb M. Stewart

Bank of Nova Scotia logged stronger-than-expected first-quarter earnings despite a higher provision for credit losses, boosted by growth in both its Canadian and international banking operations.

The Canadian bank recorded income of 2.17 billion Canadian dollars ($1.61 billion), or C$1.68 a share, against C$1.72 billion, or C$1.35, a year earlier. On an adjusted basis that strips out certain items, earnings were C$1.69 a share, topping the C$1.61 forecast by analysts polled by FactSet.

Overall revenue for the for the three months to Jan. 31 increased 5.9% to C$8.43 billion, the bank said.

Net interest income rose to C$4.77 billion from C$4.56 billion a year earlier, while noninterest income advanced to C$3.66 billion from C$3.4 billion. That compared with C$4.75 billion and C$3.46 billion expected by the market.

Scotiabank, one of Canada's Big Six banks, recorded a total provision for credit losses of C$962 million, an increase of C$324 million year-over-year that the bank said reflected growth in its retail portfolio and the affect of the continued unfavorable macroeconomic outlook.

Gross impaired loans increased to C$6.12 billion as of the end of January from C$5.73 billion last quarter, led by new commercial formations in Canadian banking that were largely related to one account in the transportation sector, and higher retail formations in international banking mainly in Chile, Mexico and Peru, the bank said.

Analysts are closely watching the credit performance of Canada's banks given risks in commercial real estate as North American economies slow and expectations household stress will build amid a pending wave of mortgage renewals at higher interest rates.

Scotiabank's common equity tier 1 ratio stood to 12.9% by the end of January, down roughly 0.1 percentage point on the prior quarter. The country's banking regulator late last year opted against requiring lenders to set aside more capital against potential losses, holding the CET1 target for the big banks at no less than 11.5% of risk-weighted assets.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

February 27, 2024 06:25 ET (11:25 GMT)

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