Bank of Nova Scotia
reported a 12-per-cent rise in quarterly profit due to its acquisition last year of online bank ING Direct, but results were marred by a sluggish performance at its international unit.
“I thought it was a pretty good quarter for domestic banking, but [there was] weakness in international, which really drives the story at Scotia,” said Tom Lewandowski, a bank analyst at St. Louis-based Edward Jones.
Income from Scotiabank’s international banking division, which includes a presence throughout Latin America and parts of Asia, rose 3 per cent to $467-million, held back by narrowing interest margins and an 18-per-cent increase in loan-loss provisions. The results cap a Canadian bank reporting period in which most banks benefited from steady growth in domestic retail banking and wealth management income but were hurt by weakness at their capital markets arms.
Scotiabank’s overall net profit rose to $1.7-billion, or $1.30 per share, in the fourth quarter ended Oct. 31, from $1.52-billion, or $1.18 per share, a year earlier.
Excluding amortization of intangibles, the bank earned $1.31 per share, slightly below the average analyst estimate of $1.32, according to Thomson Reuters I/B/E/S.
Canadian retail bank earnings rose 23 per cent to $593-million, driven mainly by the bank’s acquisition of the Canadian online banking division of Dutch lender ING Groep NV last year.
Retail banking has continued to be a source of stability for Canadian lenders despite concerns about a slowing housing market and low interest rates.
Even excluding the impact of the ING Direct acquisition, Scotiabank saw residential mortgages grow by 5 per cent, while personal loans and credit cards grew by 10 per cent.
Fuelled by record-low borrowing costs, Canada’s housing market boomed following the financial crisis, lifting bank profits. But some fear this means banks will be hit especially hard if the property sector crashes.
Housing activity softened in 2012 after the federal government tightened mortgage rules, then bounced back this year. The Bank of Canada on Wednesday said it still expects a soft landing for housing and suggested it is in no hurry to raise interest rates.
Income at Scotiabank’s global banking and markets division, its wholesale banking unit, fell 15 per cent to $344-million.
The results are the first since Brian Porter took over as Scotiabank chief executive in November, replacing Rick Waugh, who stepped down after 10 years in the top job.