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Scotiabank profit beats estimates, lifts dividend by 11% - Metro US

Scotiabank profit beats estimates, lifts dividend by 11%

FILE PHOTO: A Bank of Nova Scotia logo is seen outside of a branch in Ottawa

TORONTO (Reuters) -Bank of Nova Scotia (Scotiabank) reported better-than-expected fourth-quarter profit on Tuesday on lower provisions, with Canadian lending and wealth management boosting earnings, and lifted its divided by 11%.

Canada’s third-largest lender announced a dividend hike of C$1 a share, its first in eight quarters, and the first major bank to do so following the lifting of restrictions by the country’s financial regulator this month.

Scotiabank will also buy back 24 million shares, or around 2% of its outstanding shares, it said.

Canadian banks and investors have been hoping for an improvement in non-mortgage lending, as earnings beats over past quarters have been driven by home loans and the release of loan-loss reserves set aside last year.

Scotiabank’s non-mortgage lending in Canada grew 3.9%, compared with a 13% increase in home loans. In its international business, non-mortgage loans were flat, versus 8% growth in residential lending.

“Earnings and the dividend increase were higher than anticipated,” Barclays Analyst John Aiken said in a note.

“Overall, we believe that Scotia reported a solid quarter but we anticipate that its return of capital will still fall to the lower end of its peers as the remainder of the group reports through the week.”

Scotiabank took provisions of C$168 million during the quarter, down from C$1.1 billion a year ago. Excluding the impact of provisions and taxes, the bank posted adjusted profit of C$3.6 billion, up 4% from a year ago.

While net interest income in Canada did rise 7% due to stronger lending, it was tempered by a decline in margins, as loan growth remained skewed to residential mortgages, which have lower rates.

Margins also fell in the international business, despite policy rate hikes in some of the countries the bank does business in, also due to the loan mix.

Earnings were boosted by higher fees in Canadian banking and wealth management, helping offset weakness in the capital markets unit.

Net income excluding one-off items rose to C$2.72 billion ($2.13 billion), or C$2.10, in the three months ended Oct. 31, compared with C$1.9 billion, or C$1.45, a year earlier. Analysts had expected C$1.90 a share, according to IBES data from Refinitiv.

($1 = 1.2766 Canadian dollars)

(Reporting by Nichola Saminather in Toronto and Manya Saini in Bengaluru; Editing by Shinjini Ganguli, Bernadette Baum, Kirsten Donovan)

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