Scotiabank Beats Estimates in Revival of Capital-Markets Unit

(Bloomberg) -- Bank of Nova Scotia’s capital-markets division is showing signs of a turnaround.

• The unit had long been the weakest link for the Toronto-based lender, with growth in quarterly profit only once in the past two years. The division appears to have turned a corner in the fiscal first quarter, reporting an 11% increase in income, helping the bank post results that beat analysts’ estimates.

Key Insights

• Scotiabank’s global banking and markets division benefited from rising equities and fixed income and more deal activity compared with a year earlier. Earnings for the division totaled C$372 million ($280 million), up from C$335 million.
• The company started reporting global wealth management as a separate division, and business head Glen Gowland wants it to eventually generate 15% of overall bank earnings. Wealth-management earnings rose 12% to C$309 million, to account for 13% of overall earnings.
• Scotiabank has exited more than 20 countries in the past six years, scaling back in the Caribbean and Asia to focus on the Americas, with an emphasis on Mexico, Peru, Chile and Colombia. The international-banking division earned C$582 million, down 30% from C$828 million a year earlier.
• The lender told investors in January that it aims to get 40% of its earnings from Canadian banking. The domestic-banking division had earnings of C$852 million in the first quarter, down 1% from a year ago.

Market Reaction

• Scotiabank has fallen 0.3% this year through Monday, underperforming the 2.2% gain for Canada’s eight-company S&P/TSX Commercial Banks Index.

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• Net income for the three months through Jan. 31 rose 3.5% to C$2.33 billion, or C$1.84 a share, after a gain from its Thanachart Bank sale, charges tied to derivatives and discontinued software, and revisions to its allowance for credit losses.
• Adjusted earnings totaled C$1.83 a share, beating the C$1.75 estimate of 13 analysts in a Bloomberg survey.
• Read more about Scotiabank’s quarterly results here.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, ;Derek Decloet at ddecloet@bloomberg.net, Daniel Taub

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