(Bloomberg) -- Bank of Nova Scotia beat analysts’ estimates on higher revenue from its Canadian retail banking and international units even as it continues to set aside more money for possibly bad loans.
Profit was $1.63 a share on an adjusted basis in the fiscal third quarter, it said in a statement Tuesday, coming in ahead of the $1.62 average estimate of analysts in a Bloomberg survey. Its domestic-banking unit posted adjusted earnings of $1.1 billion (US$817 million) for the three months through July, up six per cent from the same period last year.
The results come after two years of negative or only slightly positive growth in the bank’s important Canadian division, where loan growth has been slow and provisions for loan losses have eaten into the bottom line. Scotiabank had also deliberately paused growth in its mortgage portfolio as it pursued a new strategy of going after clients who have multiple products with the bank.
“The results reflect solid revenue growth from continued deposit momentum and net interest margin expansion, a third consecutive quarter of positive operating leverage, partly offset by an increase in provision for credit losses compared to the prior year,” the Toronto-based lender said in the statement.
Provisions for credit losses totalled $1.05 billion in the quarter, roughly in line with analysts’ forecasts. Consumers and businesses are increasingly struggling to pay off debts amid persistently high interest rates, and Scotiabank has grappled with high credit provisions at its operations in Colombia, Chile and Peru.
The lender put aside just over $1 billion for potential loan losses in the second quarter and $819 million in the third quarter of fiscal 2023.
Earnings at its international business were $709 million in the quarter, up 10 per cent from the prior year, with the bank citing revenue growth and cost cutting, partially countered by higher provisions for loan losses.
Scotiabank announced a deal earlier this month to acquire almost 15 per cent of Cleveland-based KeyCorp for US$2.8 billion, saying the investment is part of a move to shift more capital from Latin America to the U.S. That’s a key element of Chief Executive Officer Scott Thomson’s strategy to lift shareholder returns at the bank, which are the lowest among Canada’s six largest banks over the past five years.
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