Scotiabank reports $2.5B second quarter profit, beats expectations

Bank of Nova Scotia believes an economic rebound is on its way this year, but says recovery might be uneven across the countries it operates in.

While Canada, the U.S. and some Latin American countries have seen success with widespread vaccination efforts and reopening is on the horizon, the bank’s chief executive Brian Porter said Tuesday that others are falling behind.

“The recovery in the Pacific Alliance is lumpy. That’s the nature of our footprint and the maturity of the banking markets,” he told analysts.

Porter explained that while Mexico and Chile have returned to pre-COVID level of earnings, Peru continues to struggle with effects of the pandemic.

The uneven nature of economic recovery will be a key issue for the bank to manage as it looks to emerge from the health crisis and uncover even more opportunities to deploy the massive reserves it built up earlier in the pandemic, when it was preparing for people to default on loans.

Government relief programs for people who lost their jobs and businesses needing wage and rent support helped stave off some of the troubles the bank was facing, leaving it flush with cash.

Porter announced Tuesday that Scotiabank’s provisions for credit losses — money it puts aside in anticipation of bad loans — fell to $496 million in the second quarter, compared with $1.85 billion a year ago when the pandemic began and the economy came to halt.

The steep decline in provisions was in line with what Canada’s other major banks unveiled when they reported their financial results last week.

Like the others, Scotiabank also topped expectations during the period ended April 30 and reported its quarterly profit nearly doubled compared with a year ago.

The bank earned $2.46 billion or $1.88 per diluted share, up from a profit of $1.32 billion or $1.00 per diluted share in the same quarter last year.

Porter attributed the strong results to the bank’s ability to navigate unprecedented times and maintain stability even when its customers are grappling with hardships.

“We continue to see good operating momentum across the bank, and I am encouraged by the steady month-to-month improvement in both business conditions and our results,” said Porter.

“Many of our businesses have yet to return to pre-pandemic level of earnings, but we see a clear path to achieving this over many year terms.”

His bank’s revenue totalled $7.74 billion, down from $7.96 billion.

On an adjusted basis, Scotiabank said it earned $1.90 per diluted share, up from an adjusted profit of $1.04 per diluted share a year ago.

Analysts on average had expected the bank to earn an adjusted profit of $1.76 per share, according to financial data firm Refinitiv.

The results were buoyed by a deal to buy an additional 7% stake in Scotiabank Chile from the Said family, which the bank signed last month.

The deal, valued at about $500 million, will increase Scotiabank’s interest in its Chilean operations to 83%.