On Tuesday, Bank of Nova Scotia (Scotiabank) reported a better-than-expected fourth-quarter profit, boosted by Canadian lending and wealth management, and raised its dividend by 11 percent.
Canada’s third-largest bank announced a C$1-per-share dividend increase, the first in eight quarters and the first major bank to do so since the country’s financial regulator lifted restrictions earlier this month.
Scotiabank will also buy back 24 million shares, or about 2% of its outstanding stock, according to the company.
Non-mortgage lending has been a source of hope for Canadian banks and investors in recent quarters, as home loans and the release of loan-loss reserves set aside last year have driven earnings beats.
Non-mortgage lending at Scotiabank increased by 3.9 percent in Canada, compared to a 13 percent increase in home loans. Non-mortgage loans were flat in its international business, compared to an increase of 8% in residential lending.
In a note, Barclays (LON:BARC) Analyst John Aiken said, “Earnings and the dividend increase were higher than expected.”
“Overall, we believe Scotia delivered a strong quarter, but we expect its return on capital to remain near the bottom of its peers as the rest of the group reports this week.”
During the quarter, Scotiabank took provisions of C$168 million, down from C$1.1 billion a year ago. The bank made an adjusted profit of C$3.6 billion, up 4% from a year ago, after excluding the impact of provisions and taxes.
While net interest income in Canada increased by 7% as a result of increased lending, it was offset by a drop in margins as loan growth remained skewed toward lower-rate residential mortgages.
Due to the loan mix, margins in the international business also fell, despite policy rate hikes in some of the countries where the bank does business.
Higher fees in Canadian banking and wealth management helped offset weakness in the capital markets unit, boosting earnings.
In the three months ended Oct. 31, net income excluding one-time items increased to C$2.72 billion ($2.13 billion), or C$2.10, compared to C$1.9 billion, or C$1.45, a year earlier. According to Refinitiv’s IBES data, analysts expected C$1.90 per share.
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