Bank of Nova Scotia beat analysts’ estimates slightly on continued momentum in the company’s wealth-management business.   

The Toronto-based lender earned $1.58 per share on an adjusted basis in the fiscal second quarter, it said in a statement Tuesday, topping the $1.56 average estimate of analysts in a Bloomberg survey.

Higher overall revenue helped Scotiabank counter growing provisions for potentially bad loans, though profit on an adjusted basis still slipped 2.6 per cent from a year earlier to $2.11 billion. The company set aside slightly more than $1 billion for credit losses in the three months through April, close to what analysts had forecast.

Scotiabank saw earnings growth in both its wealth-management and capital-markets businesses. While trading revenue slipped from the first quarter, fee-based revenue was up on underwriting and advisory work as well as from mutual funds, particularly in Mexico.  

The second quarter also marked another period of revenue growth for the lender’s domestic retail division, where it benefited from higher deposits. But as conditions worsen for consumers and businesses, provisions for credit losses in the division almost doubled to $428 million, denting profit in the unit. The bank said it saw more impaired provisions in auto loans and residential mortgages. 

The quarter’s results “reflect solid earnings from each of our four business lines,” Chief Executive Officer Scott Thomson said on a conference call with analysts, noting that productivity improvements have helped boost both the domestic and international divisions. “This is our second quarter since we shared our enterprise-wide strategy, and I’m encouraged by our continued progress against our plan.”

Scotiabank has grappled with a higher cost of funding than its rivals and has taken steps to work on that over the past year or so, including by slowing the growth of its mortgage book and seeking out more low-cost deposits. Analysts expect the company to benefit from lower interest rates, but those have yet to materialize.

“The headline beat should garner support for Scotia, however, we would not expect to see major outperformance in its stock,” Jefferies Financial Group Inc. analyst John Aiken wrote in a note to clients.

The bank’s shares rose 0.2 per cent to $65.75 at 10:27 a.m. in Toronto. They’ve gained two per cent this year.

Keefe, Bruyette & Woods analyst Mike Rizvanovic called the three-month period a “roughly in-line quarter,” with “both the top line and expenses performing roughly as expected, and PCLs remaining manageable.”   

The bank’s capital position remained strong — its Common Equity Tier 1 ratio increased to 13.2 per cent, up 30 basis points from the prior quarter as it benefited from organic capital generation, share issuances through its dividend reinvestment plan, or DRIP, and lower risk-weighted assets. 

Still, Scotiabank announced no change to its quarterly dividend of $1.06 a share — despite analysts’ expectations for an increase as it typically raises its payout in the second quarter of the year — and also maintained a discount on its DRIP, a measure used to help raise capital.  

Chief Financial Officer Raj Viswanathan said the bank expects earnings growth to resume next year and that it should “should start commencing our dividend increases in 2025, in line with what we do every year in the second quarter.” The bank still plans to turn off its DRIP discount in the second half of this year, he said.