Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

Scotiabank headquarters on on King St., in Toronto’s financial district.

Fernando Morales/The Globe and Mail

Surging profit from key international markets helped Bank of Nova Scotia to robust second-quarter results, and the lender is now casting around for possible acquisitions that could reinforce its presence in Latin America.

With adjusted profit up 11 per cent, Toronto-based Scotiabank churned out solid results in Canadian banking, as its outlook for the domestic economy brightens. Profit from capital markets swelled as loan loss provisions from the energy sector continue to shrink.

Yet the story of Scotiabank's growth is still largely written in its international footprint – the key feature that distinguishes the bank from its peers. Fears that U.S. President Donald Trump could upend decades of trade policy and tangle supply chains have weighed on projections for economic growth in Latin America, compounding fears that Scotiabank's loan growth could turn choppy. So far, the bank appears to have sidestepped any pitfalls, and executives continue to show confidence in the region.

Story continues below advertisement

For subscribers: Scotiabank sees wave of key bankers leave amid shake-up

For subscribers: Tax-friendly trades a boon for Scotia's capital markets wing

Scotiabank is Canada's fourth major lender to surpass second-quarter forecasts, with Bank of Montreal posting the lone narrow miss among the Big Five. National Bank of Canada, the sixth-largest lender by assets, is scheduled to report results on Wednesday.

"We delivered strong results in the first half of the year, and expect this momentum to continue in the second half of 2017," said Brian Porter, the bank's chief executive officer.

Referring specifically to operations in Mexico, Peru, Chile and Colombia, Mr. Porter added: "We continue to see great short- and long-term potential across our Pacific Alliance countries."

Profit in the international division rose 19 per cent from the same quarter last year, to $595-million, on the strength of higher net-interest margin and lower provisions for credit losses – the money banks set aside to cover bad loans. And Scotiabank's international-loan book grew 3 per cent year over year, and 4 per cent from the prior quarter.

"Look at indicators like car loans, retail sales in stores – all these indicators are showing good trends. Business confidence is also strong," said Ignacio Deschamps, Scotiabank's head of international banking. "And quite frankly, although there is a lot of media attention on potential changes of U.S. trade policy, the reality day-to-day in the companies, in credit demand, is really strong."

Story continues below advertisement

The bank's common equity Tier 1 capital ratio – one measure of financial health – rose to 11.3 per cent from 11 per cent a year ago, which "puts it at the top of the industry," according to National Bank Financial Inc. analyst Gabriel Dechaine.

With healthy capital reserves on hand, Mr. Porter is open to making acquisitions "over the course of the next year." And though he promised to stay "very disciplined," he said "there will be opportunities, both in Canada and internationally, that we'll look at."

Just this week, Scotiabank struck a deal to sell its Malaysian banking subsidiary for about $340-million, and has said it would consider offers for its business in Thailand. The proceeds could be redeployed in Canada or in Latin America.

The bank's chief financial officer Sean McGuckin told reporters that the bank's priority is still to grow organically. But he said it "would be helpful" if Scotiabank could boost its market share in Mexico or Chile from the current 6-per-cent range to 10 per cent or above.

"There are not a lot of opportunities that come up to purchase," Mr. McGuckin said. "Rest assured, when they do come up, we do look at them."

Growth was more subdued at home, where Scotiabank's profit in Canadian banking fell 1 per cent to $971-million, compared with a year ago. However, adjusting for gains on real estate sales, profit was up 5 per cent for the quarter, and executives struck an optimistic note.

Story continues below advertisement

"For the past several months, our macroeconomic view of Canada has been getting more and more favourable," said Canadian banking head James O'Sullivan.

Scotiabank earned a total of $2.06-billion or $1.62 a share, in the quarter that ended Apr. 30. That was up sharply from $1.58-billion or $1.23 a in the second quarter of 2016, when results were hampered by a $278-million after-tax restructuring charge.

Adjusting to exclude the charge, Scotiabank's profit reached $1.63 per share, beating the consensus expectation of $1.56 among analysts polled by Bloomberg.

Provisions for credit losses decreased 22 per cent from last year to $587-million, due partly to lower commercial provisions in the energy sector. But the bank's provisions increased 6 per cent from the first quarter, due largely to "a few commercial accounts in Puerto Rico and Brazil."

Lower loan losses helped lift capital markets profit 60 per cent higher than a year ago, to $517-million, and the equities, fixed-income, and U.S. lending businesses also performed better.

The bank held its quarterly dividend steady and announced plans to buy back up to 2 per cent of its outstanding common shares.

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies