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Underwriting and advisory revenue at the Bank of Nova Scotia jumped to $202-million from $113-million in the same period last year, an increase of 79 per cent, thanks to a number of big deals.Reynard Li/Bloomberg

Surging investment banking revenue fuelled earnings growth in the capital markets arm of Bank of Nova Scotia in its latest quarter, with one analyst maintaining the results could be evidence of a turnaround.

The strong capital markets results at Scotiabank mirror those of the other four big banks that reported last week. The trading wings have stood out, with Britain's Brexit vote to leave the European Union a big factor in boosting client activity during the quarter.

Profit in Scotiabank's global banking and markets division, which includes capital markets, rose 12 per cent to $421-million for the quarter that ended on July 31. Underwriting and advisory revenue jumped to $202-million from $113-million in the same period last year, an increase of 79 per cent, thanks to a number of big deals.

In June, Scotia Capital Inc. led Brookfield Renewable Partners LP $460-million bought deal, alongside TD Securities Inc., HSBC Securities (Canada) Inc. and Barclays Capital Canada Inc.

Scotia Capital and CIBC World Markets advised Husky Energy Inc. on its $595-million asset sale to Whitecap Resources Inc. in May.

Elsewhere in capital markets, trading revenue rose 21 per cent year-over-year to $428-million from $353-million. All product lines were up at Scotia Capital with particular strength in fixed income. Revenue in that segment rose nearly 90 per cent from the year-ago quarter to $155-million. Scotiabank had only two trading loss days in the third quarter, compared with three in the second quarter.

"We have long argued that revenues and earnings from [capital markets] will grow in an environment of heightened, but not toxic, volatility," wrote Peter Routledge, an analyst with National Bank Financial, in a note to clients.

"After several underwhelming quarters, Bank of Nova Scotia's capital markets business has delivered a result consistent with our thesis, which could signal a turnaround for this franchise's prospects."

On Wednesday, National Bank of Canada will be the last of the Big Six Canadian banks to report its quarterly results.

The bank-owned dealers have been benefiting from the robust secondary stock offering market in Canada, which has risen 22 per cent to $36-billion year-over-year, according to Bloomberg data. The big area of weakness, though, has been the initial public offering (IPO) market. That market has been virtually closed since Hydro One Ltd's $1.8-billion partial privatization last fall.

By this time last year, Canada had seen a number of high-profile IPOs, including those from Shopify Inc. and Cara Operations Ltd. A handful of special purpose acquisition corporations (SPACs) had also raised roughly a billion dollars. This year, it has been crickets for the most part, in the IPO market.

Amid that quiet spell, clothing retailer Aritzia Inc. filed for an initial public offering earlier this month. Bankers are hoping a successful offering by Aritzia will reopen the IPO market after Labour Day. CIBC World Markets Inc. won the coveted "left lead" role on Aritzia's underwriting syndicate.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 10:17am EDT.

SymbolName% changeLast
ATZ-T
Aritzia Inc
-0.13%37.54
BEP-N
Brookfield Renewable
-0.82%22.96
BNS-N
Bank of Nova Scotia
+0.66%51.5
BNS-T
Bank of Nova Scotia
+0.45%69.73
CM-N
Canadian Imperial Bank of Commerce
+0.58%50.36
CM-T
Canadian Imperial Bank of Commerce
+0.46%68.21
H-T
Hydro One Ltd
-0.48%39.41
NA-T
National Bank of Canada
+0.25%114.86
S-T
Sherritt Intl Rv
+1.79%0.285
SHOP-N
Shopify Inc
+0.18%78.76
SHOP-T
Shopify Inc
-0.22%106.47
WCP-T
Whitecap Resources Inc
+0.1%10.2

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