Scotiabank hikes dividend 11% as profit rises on retail gains, improved loan picture

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Bank of Nova Scotia reported higher fourth-quarter profit and increased its dividend by 11 percent as retail banking profits improved and outstanding loans remained low.

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Canada’s third-largest bank is the first to report earnings for the fiscal quarter ended October 31, and has launched a plan to buy back about 24 million shares in total — up to 2 percent of its common shares — by the end of 2022. . ,

The dividend increase and share buyback plan is the first increase in Scotiabank’s shareholder payout in nearly two years, after Canada’s banking regulator recently lifted restrictions that help banks preserve capital during the COVID-19 pandemic. were imposed.

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In the fourth quarter, Scotiabank earned $1.9-billion, or $1.42 per share, compared to $2.6-billion, or $1.97 per share, in the same quarter a year ago.

Adjusted to exclude certain items, the bank said it earned $2.10 per share. That was well above the consensus estimate among analysts of $1.90 per share, according to Refinitiv.

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One-time items in the quarter included a $126 million restructuring fee that stemmed from costs related to branch closures and job cuts at its international operations, which are mostly in Latin America and the Caribbean. The bank said the cuts in staff and branches were “driven by accelerated customer adoption of digital channels and process automation.”

The bank also set aside $62 million in “settlement and litigation provisions” in relation to its former metals business, which the bank closed after running into legal and regulatory problems.

For the full fiscal year, Scotiabank’s revenue was approximately $7.7-billion, a 2-percent increase over the previous year.

“The bank is well positioned to achieve its full earnings power in the coming year,” Chief Executive Officer Brian Porter said in a news release.

The core Canadian banking division reported profits of $1.24 billion in the quarter, up 59 percent from a year ago and 15 percent from the third quarter. Income from both fees and loan balances increased due to a 13-percent increase in residential mortgages and an 11-percent increase in business loans.

The bank’s international division, which has been slow to recover from the pandemic, reported a profit of $607 million, up 82 percent from a year ago. On an adjusted basis, international profit was up 10 percent from the third quarter as loan balances increased by 3 percent. But revenue declined 3 per cent year-on-year and profit before taxes and loan loss provisions was down 2 per cent.

Scotiabank’s provisions for credit losses — the bank set aside to cover loans that could go bad — amounted to $168 million in the quarter. The bank recovered $343 million in provisions that had previously been set aside for loans that were still being repaid, as economic forecasts improved. But it has also earmarked $511-million in provisions for loans that have been impaired, much of it at the international banking arm.

Scotiabank’s common equity tier 1 (CET1) ratio was 12.3 percent, up 10 basis points from the previous quarter. (100 basis points equal to one percentage point).

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