Scotiabank's Overseas Loans Surge as Canadian Mortgages Slow

(Bloomberg) -- Bank of Nova Scotia’s foreign lending is outpacing its performance in its home market -- even as Canada’s most international bank chooses to focus on fewer countries.

Scotiabank has seen loan growth in international banking outstrip its Canadian division for a year and a half, thanks in part to acquisitions. Average international loan balances rose 32 percent to C$148.6 billion ($112.5 billion) in the fiscal first quarter, eclipsing the 3.9 percent growth in Scotiabank’s domestic business. The lender’s July takeover of BBVA Chile helped bulk up its loan book at the international unit, which posted record profit in the quarter.

However, the Toronto-based lender’s first-quarter earnings missed analysts’ expectations. Canadian loan growth cooled amid an industry-wide slowdown in mortgage lending, where growth has dropped to 17-year lows.

Separately on Tuesday, Scotiabank struck a potential deal in Thailand that would see it “significantly” reduce its investment in the country. TMB Bank and Thanachart Bank, in which Scotia owns a 49 percent stake, signed a non-binding memorandum that could result in a $4.5 billion merger.

Key Insights

  • Chief Executive Officer Brian Porter is focusing international growth efforts on Mexico, Chile, Peru and Colombia. His strategy continues to pay off, with international banking posting a 23 percent jump in first-quarter earnings to C$893 million -- the best performance among Scotiabank’s three main reporting units.
  • Scotiabank’s buying spree also included the July deal for Citigroup Inc.’s consumer and small- and medium-enterprise operations in Colombia. Scotia also struck agreements to buy 51 percent of Peruvian consumer lender Banco Cencosud SA and the Dominican Republic’s Banco Dominicano del Progreso SA.
  • Last quarter, Scotiabank announced it would exit nine Caribbean nations.

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  • Scotiabank shares had fallen 3.8 percent in the 12 months through Monday, the worst performance among Canada’s six biggest banks. That compares with a 0.5 percent decline in the eight-company S&P/TSX Commercial Banks Index.
  • First-quarter net income fell 3.8 percent to C$2.25 billion, or C$1.71 a share, from C$2.34 billion, or C$1.86 a share, a year earlier. Adjusted per-share earnings totaled C$1.75, missing the C$1.82 average estimate of 12 analysts in a Bloomberg survey.
  • Scotiabank raised its quarterly dividend 2.4 percent to 87 cents.
  • Read more about Scotiabank’s quarterly results here.

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