Bank of Nova Scotia missed analysts’ estimates as lending margins shrank from a year earlier, countered by increased earnings at the bank’s capital-markets division.
(Bloomberg) — Bank of Nova Scotia missed analysts’ estimates as lending margins shrank from a year earlier, countered by increased earnings at the bank’s capital-markets division.
Net interest margin, a measure of how much Scotiabank makes from lending money compared with what it pays for deposits, came in at 2.1% for the fiscal third quarter, the Toronto-based company said in a statement Tuesday. That was worse than the 2.13% it reported for the second quarter and 2.22% a year earlier, and lower than the 2.3% average analyst forecast in a Bloomberg survey. Overall earnings fell short of analysts’ estimates.
Scotiabank’s international division — centered on Chile, Colombia, Mexico and Peru — sets the lender apart from Canada’s North America-focused banks, with the unit weighing on the lender’s shares in recent years. Scott Thomson, who took over as Scotiabank’s chief executive officer earlier this year, said in February that the division’s “returns are not commensurate with our expectations in certain countries” and that the firm is “in the process of assessing our international business mix.”
The unit’s net interest margin shrank to 4.1% in the three months through July from 4.12% in the fiscal second quarter.
Earnings at the bank’s capital-markets unit rose 15% from a year earlier to C$434 million, mainly the result of higher-than-expected revenue of C$1.34 million.
“Overall, we have a mildly positive view” of the third-quarter results “as adjusted EPS was above our estimate and capital has moved in the correct direction,” RBC Capital Markets Darko Mihelic said in a note to investors.
Shares of Scotiabank rose 1.5% to C$63.77 at 9:46 a.m. in Toronto. They’ve dropped 3.9% this year, compared with a 3.7% decline for the S&P/TSX Commercial Banks Index.
Higher provisions for credit losses hurt net income in both the Canadian banking and international segments. Scotiabank attributed the increase in provisions to a “continued unfavorable macroeconomic outlook, primarily in Canadian banking.” That unit was also hurt by an increase in non-interest expenses.
Deposits, meanwhile, increased by C$11.7 billion ($8.6 billion) from the second quarter to C$957.2 billion.
“Our results this quarter demonstrate early progress on our deposit growth initiatives and continued focus on balance sheet strength and stability, key priorities as we position the bank for our next phase of growth,” Thomson said in the statement.
Scotiabank has suffered a number of recent departures from its North American bond-trading teams, including the exit of Jacqueline Kope, Bloomberg News reported last week.
Also in the results:
- Net income slumped 15% to C$2.21 billion, or C$1.72 a share. Adjusted earnings per share totaled C$1.73, less than the C$1.74 average estimate in a Bloomberg survey.
- The bank set aside C$819 million in provisions for credit losses. Analysts projected C$761.6 million.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.