Bank of Nova Scotia : Scotiabank 2Q Net Down 10% On Year-Ago Gains; Tops Street Views
05/29/2012| 12:21pm US/Eastern
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--Scotiabank tops consensus estimates
--International banking lifts earnings
--Slight uptick in impaired loans worrisome
(Rewrites throughout. Adds context, analyst's comments in paragraphs 5 and 10.)
By Caroline Van Hasselt
Of
Bank of Nova Scotia's (BNS) second-quarter profit dropped 10%, as one-time gains bolstered year-earlier results.
Excluding the year-earlier gains, earnings jumped 16% as Scotiabank, located in more than 50 countries, benefited from its acquisition of a majority stake of Colombia's Banco Colpatria, tight expense control and higher revenue in domestic banking.
Net income declined to C$1.46 billion, or C$1.15 a share, in the quarter ended April 30, from C$1.62 billion, or C$1.39, a year earlier, the Toronto-based bank said in a statement. The year-ago results included 33 Canadian cents a share in acquisition- and foreign currency-related gains. Adjusted earnings, which add back non-cash after-tax intangible assets, fell to C$1.18 a share from C$1.41 but topped analysts' expectations of C$1.15, based on the Thomson Reuters' mean estimate.
Scotiabank was the fourth major Canadian bank to report results for a quarter in which their various growth strategies were beginning to take hold. Unlike its peers, the lender, Canada's third-largest by assets, has a much more international retail-banking focus. In January, it completed its US$1 billion purchase of a 51% stake in Banco Colpatria, Colombia's fifth-largest financial group, to extend its footprint in Latin America.
"Overall, this was a better-than-expected quarter," said Brad Smith, an analyst at Stonecap Securities in Toronto.
Scotiabank shares were recently up almost 2% to C$51.76 in Toronto.
Total revenue climbed 1% to C$4.8 billion, above analysts' expectations of C$4.6 billion.
International banking propelled net interest income, which rose 16% to C$2.48 billion. While residential mortgages and consumer auto loans were also higher, international banking accounted for C$169 million, or almost half of increase.
The bank set aside less money for bad loans. Loan-loss provisions fell to C$264 million from C$270 million a year earlier.
Domestic impaired loans fell 7%, reflecting improved retail and commercial loan portfolios, but gross impaired loans inched up 2% from a deterioration in its U.S. and European wholesale book, Smith said.
In Canada, where slowing consumer demand for credit remains a concern, Scotiabank's Canadian Banking unit earned C$461 million, up 23% from C$374 million a year earlier but down 3% from C$475 million in the first quarter.
Profit dropped 40% to C$298 million in its global wealth-management segment because of last year's one-time revaluing of its original 18% investment in DundeeWealth. Excluding those amounts, net income rose 14% on strong insurance and mutual fund sales.
Scotiabank said its year-earlier net income included one-time gains of C$286 million from its DundeeWealth and international acquisitions and C$77 million that's foreign-exchange related arising from converting to new accounting rules.
Royal Bank of Canada (RY) and Toronto-Dominion Bank (TD), the two largest Canadian banks, and Bank of Montreal (BMO), the fourth biggest, last week posted higher operating earnings, though RBC missed consensus estimates by a penny and BMO benefited from lower taxes.
-By Caroline Van Hasselt; Dow Jones Newswires; 416-306-2023; caroline.vanhasselt@dowjones.com
(Judy McKinnon contributed to this article.)
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