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June 2, 2021

Strong domestic results help Scotiabank Q2 2021 earnings to top analyst forecasts

By Douglas Blakey

Scotiabank Q2 2021 earnings beat analyst estimates boosted by a strong performance from its Canadian banking division. It means that all of the Big five Canadian lenders top analyst forecasts for the quarter to end April.

Specifically, Scotiabank Q2 2021 net income of C$2.46bn compares with C$1.32bn for the year ago quarter.

Canadian Banking generates earnings of C$931m with a strong rebound in fee income. This compares with C$481m for the year ago quarter.

The results are also boosted by lower provision for credit losses, as well as solid asset and deposit growth.

Meantime, Wealth Management earnings of C$378m are supported by strong revenue growth and positive operating leverage for the sixth consecutive quarter. In the year ago quarter, the unit reported earnings of C$314m.

International banking net income of C$420m is up by 143% from a year ago. This increase is driven by lower provision for credit losses and lower non-interest expenses but partially offset by lower revenues and higher income taxes.

Scotiabank Q2 2021: provisions for credit losses -73% y-o-y

At group level, the provision for credit losses of C$496m compares with C$1.85bn, a decrease of 73%. The provision for credit losses ratio falls by 86 basis points to 33 basis points.

Provision on performing loans represents a net reversal of C$696m million, compared to C$976m, a decrease of C$1.67bn. Of this decrease, $1.28bn is related to retail driven by the more favourable credit and macroeconomic outlook across the footprint and credit migration to impaired, mainly in International Banking.

On the other hand, the bank’s International unit posts C$910m in loan write-offs as payment deferral programmes expire.

“We delivered another quarter of strong results. This reflects the strength of our diversified business platform, and the solid economic recovery underway in our core markets,” says Brian Porter, President and CEO, Scotiabank.  “Our commitment to superior customer service was recognised in the JD Power 2021 Canada Retail Banking Satisfaction Study. The Bank rose to #2 among large banks and Tangerine was recognised as number one for the tenth consecutive year among mid-sized retail banks.

“Our commitment to strong ESG practices was also recognised with a rating of “AAA” in the MSCI ESG Ratings assessment. This is a rating held by only 2% of banks globally.”

The Scotiabank share price at C$81 is ahead by 19% for the year to date.

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