March 3, 2015 / 12:42 PM / 3 years ago

Scotiabank profit misses expectations, shares drop

(Reuters) - Bank of Nova Scotia (BNS.TO) posted a lower-than-expected quarterly profit on Tuesday, hurt by an increase in credit-loss provisions and higher expenses, sending its shares down about 1.6 percent.

Snow covers the Scotiabank logo at the Bank of Nova Scotia headquarters in Toronto December 16, 2013. REUTERS/Chris Helgren

The results at Scotiabank, Canada’s No. 3 lender, round out a mixed quarter for the country’s big banks, with Royal Bank of Canada (RY.TO) and Canadian Imperial Bank of Commerce (CM.TO) topping profit expectations, Bank of Montreal (BMO.TO) falling short, and Toronto-Dominion Bank (TD.TO) basically in line.

The group’s results were the focus of much market attention as investors tried to gauge the impact of the oil-price slump and a sluggish economy on performance.

Scotiabank’s provisions for credit losses jumped 30 percent to C$463 million ($369.8 million) in its first quarter, ended Jan. 31, and noninterest expenses rose about 3 percent.

Loans outstanding to corporate clients in the oil-and-gas sector were C$15.4 billion, up 20 percent from the fourth quarter, despite low oil prices.

“It’s a bit worrisome,” Edward Jones analyst James Shanahan said. “If that meant that they are making large, incremental bets on the oil-and-gas sector, that makes me a little bit nervous.”

Chief Risk Officer Stephen Hart said the bank’s “oil-and-gas exposure is manageable”.

“Any stress losses would leave the bank within our risk tolerances for both capital and loan loss provisions and would not affect our ongoing strategies,” he said on a conference call.

Scotiabank recorded sharp growth in loans and deposits at its closely watched international banking division. The numbers come four months after the bank, considered Canada’s most international, announced significant restructuring at the unit.

“Our geographic footprint and business mix allows us to generate sustainable earnings growth, notwithstanding somewhat challenging conditions in various industries,” Chief Executive Brian Porter said on the call.

Scotiabank’s Canadian banking division benefited from higher net interest margins, and profits at its wealth management division were robust.

Net income rose to C$1.73 billion, or C$1.35 per share, from C$1.71 billion, or C$1.32 per share, a year earlier.

On an adjusted basis, it earned C$1.36 per share, short of analysts’ average estimate of C$1.38, according to Thomson Reuters I/B/E/S.

Total revenue rose nearly 4 percent to C$5.86 billion.

Scotiabank increased its share buyback target to 16 million from 12 million. The buyback program will end May 29.

It also raised its quarterly dividend to 68 Canadian cents per share from 66 Canadian cents.

Additional reporting by Sneha Banerjee in Bengaluru; Editing by Sriraj Kalluvila and Peter Galloway

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