Scotiabank grows profits amid backdrop of economic challenges

TORONTO -- Scotiabank boosted its first-quarter profit as the last of the big banks to report their earnings showed resiliency against the backdrop of a gloomy economy.

See Full Article

But CEO Brian Porter warned Tuesday that he anticipates challenging market conditions and depressed energy prices will persevere, at least for the first half of this year.

"We expect there to be additional provisions for some of our loans in the energy sector," Porter said during a conference call to discuss the bank's results.

"Notwithstanding these headwinds, we are encouraged by some of the recent trends we have seen in selected businesses. ... As we look forward to the balance of 2016, we expect concerns about the global economy to persist. Here in Canada, we expect the second half of the year to be stronger than the first half, and benefit from a strengthening export economy."

The bank (TSX:BNS) reported quarterly net income of $1.81 billion, up five per cent from the $1.73 billion it reported during the same period last year, as earnings from both its Canadian and international banking operations grew.

The earnings amounted to $1.43 per diluted share, up from $1.35 per share a year ago, while revenue grew to $6.37 billion from $5.86 billion.

Scotiabank also boosted its quarterly dividend by two cents to 72 cents per share, and Porter noted that the lender's balance sheet is strong enough to "selectively pursue acquisitions."

However, Edward Jones analyst Jim Shanahan said the bank's first-quarter results, which may seem positive at a glance, reflect some troubling trends.

"They're lending more in this environment and their loan growth was stronger than we expected," Shanahan said.

"That's a positive, but it concerns me when you observe a bank increasing lending activity and raising the dividend when it seems they should be hoarding capital."

Despite warnings that oilpatch woes would hit the lenders' loan books and the sluggish domestic economy would hamper earnings growth, four of Canada's six biggest banks managed to increase their first-quarter earnings and revenue.

Only Royal Bank (TSX:RY) and National Bank (TSX:NA) reported lower net income compared to the same quarter last year.

Combined, Canada's six largest lenders reported $8.80 billion in quarterly profits, up from $8.58 billion a year ago.

In revenue, the banks raked in a combined $34.29 billion, compared to $33.05 billion during the first quarter of 2015.

Like its peers, Scotiabank reported that it is setting aside more money for bad loans, boosting its provision for credit losses by 16 per cent, or $76 million, to $539 million.

Shanahan said the true impact of the oil price shock on the banks' loan books is not evident from the lenders' first-quarter results. That's because the banks have been working with challenged oilpatch companies and providing them with some relief on their debt obligations, he said.

"The oil and gas companies are going to generally report this as good news," said Shanahan.

"The banks are going to under-report it because it masks what is otherwise deteriorating loan quality."



Advertisements

Latest Economic News

  • What's driving the softwood lumber dispute?

    Economic CTV News
    The U.S. federal government announced Monday that it’s imposing “countervailing duties” on Canadian softwood lumber of up to 24.12 per cent. Observers warn that could mean thousands of jobs lost in Canada’s forestry sector, because our exports will suddenly become that much more expensive for Americans to buy. Source
  • U.S. imposes preliminary duties up to 24% on 'subsidized' Canadian softwood lumber

    Economic CBC News
    Canada's forest industry felt the slap of the countervailing duties they were bracing for late Monday, with confirmation out of Washington that a U.S. Commerce Department investigation has once again concluded that softwood lumber imports are unfairly subsidized. Source
  • Barrick Gold sees profits rise in quarter but misses analyst expectations

    Economic CBC News
    Barrick Gold's first quarter results fell short of expectations despite swinging to a profit of $679 million US compared to a net loss of $83 million US in the same quarter last year. The gold mining giant said that once adjusted, net earnings came in at $162 million US or $0.14 per share, compared with $127 million US or $0.11 per share in the first quarter of 2016. Source
  • CN raises 2017 outlook on record Q1 volumes, helped by higher grain

    Economic CBC News
    Canadian National Railway raised its outlook for the year after profits increased 12 per cent on record first-quarter volumes, helped by an increase in Western Canadian grain. The Montreal-based railway said Monday it expects to earn between $4.95 and $5.10 per adjusted diluted share for the year, an increase of eight to 11 per cent from last year. Source
  • Redwater Energy decision that gives creditors priority over environment upheld by Appeal Court

    Economic CBC News
    Decision could affect handling of abandoned wells across Alberta By Tracy Johnson, CBC NewsPosted: Apr 24, 2017 2:11 PM MTLast Updated: Apr 24, 2017 2:11 PM MT Source
  • Creditors over environment: Alberta Court of Appeal upholds Redwater Energy decision

    Economic CBC News
    Decision could affect handling of abandoned wells across Alberta By Tracy Johnson, CBC NewsPosted: Apr 24, 2017 2:11 PM MTLast Updated: Apr 24, 2017 2:11 PM MT Source
  • Law society urged to adopt $25K cap on referral fees in Ontario

    Economic CTV News
    TORONTO -- Lawyers in Ontario should have their fees for referring clients to another lawyer capped at a maximum of $25,000, a report released on Monday recommends. In addition, the report says lawyers should have to record referral fees paid or received in their books, and report on their referral-fee practices in their annual reports to the body that regulates the profession in the province. Source
  • Car rental companies agree to pay $1.25M penalty for advertising impossible discounts

    Economic CBC News
    Two of Canada's largest car rental companies have agreed to pay $1.25 million in penalties for falsely advertising discount prices that are essentially impossible to obtain. Canada's Competition Bureau has reached what it calls a "consent agreement" with Hertz and Dollar Thrifty whereby both companies will pay penalties totalling $1.25 million and "ensure their advertising complies with the law and implement new procedures aimed at preventing advertising issues in the future. Source
  • Guide to 'fake news' wins $30,000 National Business Book Award

    Economic CTV News
    TORONTO -- A timely guide to distinguishing fact from fiction in the era of "fake news" was announced Monday as the winner of the $30,000 National Business Book Award. Neuroscientist Daniel J. Levitin said he was prompted to write "A Field Guide to Lies: Critical Thinking in the Information Age" (Allen Lane Canada) as a response to the "Balkanization of the news over the last 15 years. Source
  • Montreal couple hid winning $55M lottery ticket in daughter's toy box

    Economic CTV News
    MONTREAL -- A Montreal couple who won $55 million in a lottery jackpot hid the winning ticket in their daughter's toy box over the weekend. Nathalie Langlais and Gilles Rosnen picked up their winnings at Loto-Quebec headquarters in Montreal on Monday, three days after the Lotto Max draw. Source