Scotiabank beats profit estimates boosted by capital markets and business performance

Bank of Nova Scotia BNS-T posted higher third-quarter profit that beat analysts’ expectations on a boost from capital markets and stronger performance across its businesses.

Scotiabank earned $2.95-billion, or $2.27 per share, in the three months that ended July 31. That compared with $2.53-billion, or $1.84 per share, in the same quarter last year.

Adjusted to exclude certain items, the bank said it earned $2.28 per share. That topped the $2.10 per share analysts expected, according to data by Bloomberg.

The third quarter “was a record quarter for the bank, as all business lines reported strong results and we exceeded our medium-term objectives in the period,” Scotiabank chief executive officer Scott Thomson said in a statement.

Scotiabank is working on growing its domestic business by attracting lower-cost deposits and selling more products and services to its clients. But competition for deposits has been mounting in the Canadian market as lenders vie for customer cash.

Mr. Thomson has said he anticipates double-digit earnings per share growth the year in its domestic banking business this year – a critical part of Scotiabank’s strategy to boost profitability.

In the first quarter ended Jan. 31, Scotiabank said it expects to hit its target of 14-per-cent return on equity in 2027, a year earlier than expected. In the third quarter, Scotiabank posted an adjusted return on equity of 14.2 per cent.

Scotiabank is the second major Canadian bank to report earnings for the fiscal third quarter. Bank of Montreal posted results earlier Tuesday. National Bank will post earnings on Wednesday. Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will wrap up the week with earnings releases on Thursday.

Canadian bank stocks have soared this year, outperforming Canada’s stock market and U.S. lenders. Investors have been eager for third-quarter results to help assess whether bank stocks have more room run higher, or if their lofty valuations have peaked.

In the quarter, Scotiabank set aside $1.08-billion in provisions for credit losses – the funds banks set aside to cover loans that may default. That was lower than analysts anticipated but slightly higher than the $1.04-billion in provisions the lender reserved in the same quarter last year.

Total revenue rose 11 per cent in the quarter to $10.53-billion. But expenses increased nine per cent to $5.56-billion, which the bank said was driven by higher staffing and technology costs, as well as the negative impact of foreign exchange.

Profit from Canadian banking was $1.07-billion, up 12 per cent from a year earlier, on higher revenue driven by margin expansion and fee income growth, partially offset by higher provisions.

Scotiabank’s turnaround strategy also depends on reviving its international unit and expanding its capital markets division in the United States. Profit from the bank’s international division was up eight per cent at $725-million.

The global wealth management division generated $515-million of profit, up 23 per cent. And capital markets profit rose 37 per cent to $647-million.