Canada’s Scotiabank profit falls on capital market slump, provisions
2023.02.28 06:29
© Reuters. FILE PHOTO: The Bank of Nova Scotia (Scotiabank) logo is seen outside of a branch in Ottawa, Ontario, Canada, February 14, 2019. REUTERS/Chris Wattie
(Reuters) – Bank of Nova Scotia (Scotiabank) reported a lower first-quarter profit on Tuesday, as a lull in its investment banking division dented income from its capital markets unit and compelled the Canadian lender to set aside higher provisions.
Net income, excluding one-off items, came in at C$2.37 billion ($1.75 billion), or C$1.85 a share, in the three months ended Jan. 31, compared with C$2.76 billion, or C$2.15 a share, a year earlier. Analysts on average had expected C$2.03 a share, according to Refinitiv data.
Canada’s central bank over the past 11 months has lifted interest rates at a record pace to 4.5% to tame inflation, which was 6.3% in December, still well above the bank’s 2% target. Last month, the Bank of Canada said it would hold off on further moves to let the effects of past rate hikes sink in.
Scotiabank booked provisions of C$638 million, up from C$222 million a year ago, as it braces for increased odds of more loan defaults in a rising interest rate environment.
But net interest income, which rose nearly 5% to C$4.57 billion during the three-month period ended Jan. 31, has been a bright spot so far as the relentless monetary policy tightening campaign raised interest rates at the fastest pace in decades and expanded the margins banks earn from cost of borrowing and rate of lending.
Canada’s third-largest lender reported overall net profit of C$1.77 billion, or C$1.36 a share, compared with C$2.74 billion, or C$2.14 a share, last year.
Rival Bank of Montreal also reported a drop in first-quarter profit on Tuesday, as the lender shored up rainy-day funds to prepare for potential loan defaults in an uncertain economy.
($1 = 1.3566 Canadian dollars)
