Scotiabank's Q2 profit jumps 40%
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Seeking Alpha Analyst Since 2009
The Bank of Nova Scotia (Scotiabank) (NYSE:BNS) (TSE:BNS) announced Tuesday a 40% increase in second quarter profits, mainly due to strong growth in its international banking and global wealth management divisions, as well as $286 million accounting gain.
For the three months ending April 30, the third-largest bank in Canada reported a net income of $1.54 billion, or $1.36 per share, up from last year's $1.1 billion, or $1.02 per share.
The bank said that it benefited from a $286 million, or 26 cent per share, accounting gain due to two recent acquisitions, including the remaining 82% stake in DundeeWealth, as new Canadian accounting standards required all acquisitions to be recorded at fair value.
A gain of $260 million was recognized on the re-valuation of the bank's original 18% stake in DundeeWealth, it said.
Excluding these gains, earnings were $1.10 per share, beating analyst estimates by one cent.
Total revenue jumped 17% to $4.52 billion from $3.87 billion a year earlier. Provisions for credit losses, or money the bank sets aside to cover bad loans, were $262 million, a 22% drop from last year's $338 million.
The company attributed its succes during the quarter to increased profits from wealth management and international banking, offset by higher non-interest expenses and lower trading activity.
International banking's bottom line increased 68% to $402 million, as strong commercial and retail lending, particularly in Asia, Peru, Chile and the Caribbean, helped push income forward. The division benefited from the acquisition of Puerto Rico's R-G Premier Bank.
"International Banking's business . . . has benefitted from widening margins in certain key markets. In addition, recent acquisitions continue to provide a meaningful contribution to overall results," said president and CEO, Rick Waugh.
Scotiabank's wealth management segment saw profits rise to $489 million from $199 million in the year-ago period, helped by the acquisition of the remaining 82% of DundeeWealth. This also pushed assets under management to more than $100 billion.
Meanwhile, Canadian banking reported a 2% drop in net income to $444 million as Scotia saw higher wholesale funding costs and a consumer preference for lower yielding variable rate mortgages.
The Scotia Capital unit also recorded an 8% drop in net income to $357 million, largely due to lower lending volumes, especially corporate loans and acceptances.
However, total revenue reported by global corporate and investment banking within the unit was virtually unchanged from last year, as lower lending volumes were offset by higher investment banking revenues, including record results from Scotia Waterous.
Scotiabank's shares on the Toronto Stock Exchange responded well to the company's quarterly results, increasing 1.2% to $59.69 per share.
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