Scotiabank Tops Estimates on Loan Income, Credit Provisions Miss
(Bloomberg) — Bank of Nova Scotia beat estimates as it benefited from lower funding costs after the country’s central bank cut interest rates by 200 basis points since last June, even as it set aside more money than expected for possibly bad loans.
The Toronto-based lender earned C$1.76 per share on an adjusted basis in its fiscal first quarter, according to a statement Tuesday, more than the C$1.65 average estimate of analysts in a Bloomberg survey. Net interest income — the difference between what a bank earns on loans and pays out on deposits — totaled C$5.17 billion ($3.63 billion) for the three months through January, up 8.4% from a year earlier.
The Bank of Canada brought its policy rate down to 3% over the span of less than eight months, and Scotiabank is the Canadian lender that benefits the most from lower rates due to its higher cost of funding. The rate cuts are expected to be a major driver in the bank’s earnings growth this year.
Still, Bank of Nova Scotia’s provisions for credit losses totaled C$1.16 billion, more than the C$1.09 billion analysts had forecast. President Donald Trump’s administration has generated significant uncertainty surrounding the fate of US trade with Canada as well as Mexico, where Scotiabank also has a significant operation.
Scotiabank has recently made several strategic moves aimed at redirecting its capital from Latin America to Canada and the US. It completed its acquisition of a 14.9% stake in Cleveland-based KeyCorp late last year, and announced plans in early January to transfer its operations in Colombia, Costa Rica and Panama to Banco Davivienda SA of Colombia.
The bank incurred an after-tax impairment loss of C$1.36 billion on the transfer of those operations in the first
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