* Q2 EPS C$1.02 vs C$0.81 yr-ago
* Beats expectations for C$0.93 EPS
* Provisions for credit losses C$338 mln to C$489 mln
* Shares up 3.3 percent
(Adds analyst comments, share price, details)
By Andrea Hopkins
TORONTO, June 1 Bank of Nova Scotia (BNS.TO)
said on Tuesday quarterly profit rose 26 percent as domestic
banking had a record quarter and loan losses fell again,
exceeding expectations and sending its shares up 3.5 percent.
The strong profit growth at Canada's third-largest bank
capped a mixed earnings season for the country's big lenders,
in which credit losses improved but currency woes and weaker
trading revenues took the shine off hefty profits.
"Even after taking into account some of the unusual items
that provided a lift this quarter, the number was ahead of
expectations. Especially when compared against the softer
results reported by peers last week, we view the results
positively," CIBC World Markets analyst Rob Sedran said in a
note to clients.
Toronto-based Scotiabank posted net income of C$1.1 billion
($1.04 billion), or C$1.02 a share, in the three months ended
April 30. That compared with C$872 million, or 81 Canadian
cents a share, a year earlier.
Analysts, on average, had expected earnings of 93 Canadian
cents a share, according to Thomson Reuters I/B/E/S.
Scotiabank is Canada's most international bank with
retail or wholesale operations through much of Latin America
and the Caribbean, and a growing business in Asia.
The bank said foreign currency headwinds took a bite out of
earnings, noting a negative impact of C$112 million in the
quarter as the Canadian dollar strengthened. That diminishes
foreign profits when they are translated to the Canadian
Domestic banking drove growth in the quarter, with profits
up 42 percent from a year earlier as non-interest income rose
more than expected. International banking income fell 15
percent, while income at wholesale bank arm Scotia Capital rose
While Scotiabank's shares rose 3.3 percent to C$49.82 on
Tuesday morning on the Toronto Stock Exchange, near their
52-week high of C$52.89, some analysts said the earnings beat
was not quite as impressive as rival Bank of Montreal's
(BMO.TO), which kicked off the reporting season a week ago.
"While we believe that the results will likely be well
received, particularly against some of the negative surprises
reported by its peers, the relative low quality earnings,
sequential provision increases in Canadian banking and margin
compression in international banking should not generate as
much excitement as BMO's ... earnings," Barclays Capital
analyst John Aiken wrote.
BMO and Scotiabank exceeded expectations in the quarter,
while cross-town rivals Royal Bank of Canada (RY.TO),
Toronto-Dominion Bank (TD.TO), and Canadian Imperial Bank of
Commerce (CM.TO) missed analysts' targets in the quarter.
Scotiabank's Tier 1 capital was 11.2 percent, unchanged
from the first quarter. That's at the low end of Canadian peers
but well above most global rivals.
Provisions for credit losses fell to C$338 million from
C$489 million a year earlier and C$371 million in the first
quarter, suggesting the bank has weathered the worst of loan
losses from the recession, when consumers and businesses
struggled to repay debt.
"Our credit portfolios continue to improve, as evidenced by
lower provisions for credit losses this quarter. Furthermore,
we have little or no exposure to troubled European sovereign
debt," Chief Executive Rick Waugh said in a statement.
As expected, the dividend was unchanged at 49 Canadian
cents per common share.
In April, Scotiabank announced the FDIC-assisted
acquisition of R-G Premier Bank in Puerto Rico, which was not
material to current earnings.
The bank said the acquisition boosted total gross impaired
loans by C$1.4 billion from the prior quarter to C$5.3 billion.
Excluding the deal, impaired loans declined by C$232 million
from the first quarter.
Scotiabank also said it had no sovereign risk exposure to
Greece, Portugal or Italy, with negligible exposure to European
sovereign debt as a whole.
(Reporting by Andrea Hopkins; editing by Rob Wilson)