TORONTO (Reuters) - Bank of Nova Scotia is not rushing to embrace the United States as a potential new growth area, but is not shutting the door on the idea of U.S. acquisitions either, the bank’s chief executive said Tuesday.
“We’re very comfortable with our current strategy, and I’ve said before the U.S. retail has not been our strategy,” Scotiabank President and CEO Rick Waugh told a conference call on his bank’s quarterly results.
“We certainly feel no compulsion at this time.”
Scotiabank, Canada’s third-largest bank by market value, has operations in Canada, Mexico, the Caribbean, South America and Asia, but so far has stayed away from U.S. retail banking.
It typically likes to get a toehold in a new region before gradually bulking up, yet Scotiabank was reported in March to be interested in National City Corp NCC.N, based in Cleveland, Ohio. National City later raised US$7 billion in fresh capital from various investors.
Waugh admitted that valuations of U.S. banks are “intriguing” due to the “great decline” in their stock prices, while Scotiabank’s shares and the Canadian currency are relatively strong.
“We’ve always been opportunistic but it (the U.S.) is not on our strategy. We will watch that market and others,” he said. “We always look for value, and we also look to see what value we can provide.”
As for Scotiabank’s results, higher provisions for credit losses and lower capital market revenue helped to erode second-quarter profit by 6 percent.
The bank also said on Tuesday it would probably not meet its profit growth target for the year.
Scotiabank’s net income was C$980 million ($990 million), or 97 Canadian cents a share, in the February-April period. That was down from a profit of C$1.04 billion, or C$1.03 a share, in the comparable 2007 quarter.
The bank increased its dividend to 49 Canadian cents a share from 47 Canadian cents.
But Scotiabank said it was unlikely to meet its objective of 7 to 12 percent growth in earnings per share for the year, even as it noted that second-quarter results were better than the first quarter’s, and other signals pointed to a stronger second half.
Analysts had expected a profit of C$1.00 a share before unusual items, according to Reuters Estimates.
“While the results were below expectations, we were pleased with the overall quality of Q2’s results,” Blackmont Capital analyst Brad Smith said in a note to clients.
The bank said its provision for credit losses was C$153 million in the second quarter, up from just C$20 million in the same period last year.
Analysts have expected Canadian banks’ provisions for bad loans to rise from unusually low levels.
Net income rose 14 percent to C$416 million at Scotiabank’s Canadian retail operations.
Its International Banking unit posted a profit of C$326 million, up 11 percent despite the negative effect of foreign currency translation and higher provisions for retail loan losses in Mexico.
But profit at Scotia Capital, the investment and corporate banking arm, tumbled 21 percent to C$251 million.
Shares of Scotiabank were down 61 Canadian cents, or 1.3 percent, at C$47.59 on the Toronto Stock Exchange in afternoon trading.
Reporting by Lynne Olver; editing by Rob Wilson