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Feb 23, 2021

Scotia tops Q1 estimates despite 35% plunge in international banking profit

BMO, Scotiabank smash analyst estimates in Q1


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Bank of Nova Scotia managed to beat profit expectations in its fiscal first quarter despite suffering a significant decline in earnings from its international banking operations.

The bank's net income for the three months ending Jan. 31 inched up to $2.39 billion from $2.33 billion a year earlier. On an adjusted basis, Scotia's profit rose three per cent to $1.88 per share; analysts, on average were expecting $1.57.

BNN Bloomberg interviews Scotiabank CEO Brian Porter today at 9:40 a.m. ET/6:40 a.m. PT.

Scotia  — which is often billed as Canada's most international bank — was held back by that title in the latest quarter as the bank's adjusted profit from overseas operations tumbled 35 per cent year-over-year to $398 million. Scotia listed a range of factors, including higher credit-loss provisions and an extra month of results from its Mexican unit a year earlier, as contributing to the division's profit erosion.

Credit Suisse Analyst Mike Rizvanovic pointed out in a report to clients that Scotia’s international operations showed sequential profit improvement. However, he noted the division “remains a near-term concern, in our view, despite modest improvement [compared to the fourth quarter].” The bank's total profit benefitted from improved overall credit quality in the latest quarter as provisions for bank-wide loans that could go bad fell to $764 million from $1.13 billion in the fiscal fourth quarter.

Scotia's domestic bread-and-butter Canadian banking operations posted slim profit growth in the latest quarter as adjusted earnings rose one per cent year-over-year to $915 million.

Traders and investment bankers stood out in the quarter, as profit from Scotia’s Global Banking and Markets operations surged 46 per cent to $543 million. 

Wealth management was also a significant profit driver in the period, as net income in that unit jumped 37 per cent to $418 million. Scotia attributed the gains to higher mutual fund and performance fees.

"Our common equity Tier 1 capital ratio of 12.2 per cent provides us with additional flexibility for capital deployment in the future. We also witnessed continued strength in digital adoption across all our core markets. As we emerge from the pandemic, I am confident of continued strong performance across the bank," said CEO Brian Porter in a release.