National News

Scotiabank posts Q2 net profit of $1.8B

By The Canadian Press

TORONTO - Scotiabank boosted its second-quarter net profit by 14 per cent to $1.8 billion, helped by its Canadian banking and global wealth and insurance segments.

That's up from $1.58 billion in the same quarter of 2013.

Scotiabank (TSX:BNS) said its Canadian banking segment achieved double-digit growth in both credit card and automotive lending volumes.

"We had strong results this quarter across our businesses, particularly in Canadian Banking and Global Wealth & Insurance," Brian Porter, Scotiabank President and CEO, said in a news release on Tuesday.

"We continue to focus on deepening customer relationships to deliver results and grow all of our businesses. As well, expense growth was prudently managed," Porter said.

Earnings per share diluted were $1.39 compared with $1.22 year-over-year.

Adjusted diluted earnings per share were $1.40, beating analysts' estimates of $1.31.

Scotiabank is the third of the big banks to report second-quarter earnings after Royal Bank (TSX:RY) and TD Bank (TSX:TD), which also posted healthy profits.

Its total revenue was $5.7 billion compared with $5.3 billion in the same quarter last year and return on equity was 16.3 per cent, down from 16.5 per cent.

The provision for credit losses was $375 million in the quarter, up $32 million from the same period last year. The bank said the year-over-year increase was primarily due to higher provisions in its international banking segment.

Barclays analyst John Aiken called it an impressive quarter for Scotiabank, well ahead of expectations. But he said the uptick in provision for credit losses may be an issue for some investors.

"Scotia continued the pattern of better than anticipated results for the Canadian banks, however, its approach was decidedly different than what investors saw with Royal and TD last week," Aiken said in a research note.

"Scotia's bottom line did not benefit from better than anticipated credit quality. In fact, it saw some modest deterioration in domestic credit quality and incurred higher provisions in the Caribbean, driving up the total for International, despite moderation in Latin America."

The bank said its global wealth and insurance segment benefited from favourable market conditions.

In the quarter, Scotiabank's ING Direct Canada was renamed Tangerine.

Earlier this month, Scotiabank signed a deal to buy a 20 per cent stake in Canadian Tire's financial services business for $500 million in cash as part of a strategic partnership between the companies. Scotiabank has said it will also provide up to $2.25 billion in credit card receivables financing for Canadian Tire's financial services business.

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