Scotiabank profit rises 31% on wholesale banking

Following the trend of most of its peers this quarter, profit gains were driven by trading and investment banking income, while domestic loan growth was steady despite worries that a cooling housing market will dry up demand.

The bank, Canada’s third-largest, earned $1.52 billion or $1.18 a share, in the fiscal fourth quarter ended October 31. That compared with a year-before profit of $1.16 billion, or 97 cents a share.

Excluding a charge for amortization of intangibles, the bank earned $1.21, coming in slightly ahead of analysts’ expectations of a profit of $1.18 a share, according to Thomson Reuters I/B/E/S.

Toronto-based Scotiabank, Canada’s third-largest lender, boasts operations in more than 50 countries, with the heaviest weighting in Latin America and a growing presence in Asia.

Scotiabank’s international consumer banking segment posted a 22-percent gain in profit to $453 million, helped by the acquisition in January of Colombia’s Banco Colpatria.

Compared to the third quarter, however, international profit rose only 2.5 percent and net interest income retreated. The result was also little changed from the second quarter, raising concerns about growth in the bank’s most high-profile segment, said Barclays Capital analyst John Aiken.

“Ultimately, the investment thesis for Bank of Nova Scotia at 30,000 feet is growth in its international segment, and this has not happened for two quarters in a row,” he said.

The bank acknowledged in a statement that economic momentum in major emerging markets is moderating, but said those markets should remain the major drivers of global growth through next year and beyond.

MARKETS STRONG

Profit at the bank’s global banking and markets division, its wholesale banking unit formerly known as Scotia Capital, jumped 63 percent to $396 million as trading and investment banking results improved from a relatively weak result in the fourth quarter of 2011.

The Canadian banking segment earned $481 million, up 15 percent to $481 million, driven by an 8 percent rise in residential mortgages, and largely bucking the trend of narrower loan margins that pinched results at Scotiabank’s rivals.

The bank scored a coup in August when it won a bidding war for the Canadian online banking arm of Dutch lender ING Groep, adding $40 billion in assets and $30 billion in deposits in a segment where significant market-share gains are hard to come by.

Canadian banks expect to struggle to grow loan volumes in 2013 as Canada’s hot housing market has shown signs of cooling, while Canadians, who are already dealing with record personal debt levels, are expected to take a more cautious approach to borrowing.