People walk by the Scotiabank headquarters in Toronto.Fernando Morales/The Globe and Mail
Bank of Nova Scotia , the last large Canadian bank to report its third-quarter profits, said on Friday that it earned $931-million, down from $1.01-billion a year ago.
Better profit margins on loans - especially to businesses - and high trading revenue helped the bank bring in $3.84-billion in revenue this quarter, more than it has ever brought in before. But an increase in the amount that it set aside for troubled loans as well as writedowns hurt earnings.
Scotiabank set aside $554-million for loan losses, an increase of $395-million from the same period last year.
"Record quarters from Canadian banking and Scotia Capital and a solid contribution from international banking have allowed Scotiabank to continue to deliver strong core earnings through challenging conditions," stated chief executive Rick Waugh. He added that the bank's provisions for credit losses are "within our expectations and risk appetite."
The bank said it is sticking to its financial goals for 2009, "as we anticipate a substantially better fourth quarter than last year."
Like its peers, Scotiabank has been taking advantage of a surprisingly strong housing market. Its Canadian residential mortgage assets were up by 7 per cent, or $8-billion, compared to a year ago (before factoring in the amount that it sold to the Canada Mortgage Bond program and Ottawa's program to buy mortgages from the banks).
Also like its peers, the bank's trading operations thrived this quarter, helping its capital markets business post a 58-per-cent increase in profits to $470-million.
But profits from Scotiabank's international banking operations fell 7 per cent to $312-million. Scotiabank has the largest global reach of the Canadian banks when it comes to lending to businesses and consumers.
RBC Dominion Securities analyst Andre-Philippe Hardy said in a note to clients that the bank's trading revenues of $514-million, up from $331-million in the prior quarter, helped its results to exceed his expectations.
"Scotia ended the Big 6 earnings season with another blow-out quarter in a string where each bank exceeded expectations, with the notable exception of CIBC," Dundee Securities analyst John Aiken said in a note to clients.
"Not surprisingly, the greatest deterioration in Scotia's loan portfolio came from its international commercial lending, although all the other segments did experience additional weakness," he added. "That said, the deterioration was not as great as we had originally feared."