Scotiabank loan-loss provisions double but profit beats on trading, advisory revenue

Reuters

Published May 26, 2020 07:41

Updated May 26, 2020 08:24

By Nichola Saminather

(Reuters) - Bank of Nova Scotia on Tuesday reported quarterly profit that beat analysts' estimates despite a two-fold jump in loan-loss provisions, as its capital markets business provided a boost during a period impacted by the coronavirus pandemic.

Kicking off bank results for the first quarter to reveal the hit from the outbreak, Canada's third-biggest lender said credit provisions more than doubled to C$1.85 billion ($1.33 billion) from a year earlier as it set aside more money to cover future losses.

Commercial and corporate performing loan provisions increased by C$275 million, as the bank braced for increased losses resulting from a plunge in oil prices that has hurt the energy sector globally.

Canadian banks are preparing for higher loan losses this year and next due to the economic hit from the coronavirus pandemic. While loan deferrals and government aid have helped contain some of the short-term damage, businesses are expected to struggle when repayments come due.

Tough quarters are also expected for other Canadian lenders, with analysts predicting the sector's profits will slump by more than a third on average from a year ago.

Scotiabank's challenges aren't limited to the home front, where it saw adjusted earnings drop 42%. Its international division, which helped drive profits in good times, saw earnings slump 73% from a year ago.

But income at its global banking and markets division jumped 25%, benefitting from increased trading amid market volatility. And profit at its global wealth management segment rose 3%, partly on higher brokerage fees.

Scotiabank said adjusted profit was C$1.04 per share, compared with analysts' estimate for profit of C$0.98 per share based on Refinitiv data, but down from C$1.70 a year ago.