Scotiabank reports Q4 profit down as one-time charges offset global banking growth

TORONTO – Scotiabank kicked off bank earnings with results that showed earnings growth in its international banking division, though overall results were weighed down by about $500 million in one-time charges.

The bank reported fourth-quarter net income of $2.09 billion, down from $2.56 billion in the same quarter last year as it made several adjustments, including a $340 million loss from the sale of investments in Venezuela and Thailand and $98 million of committed support costs for the expansion of its loyalty points program.

Adjusted net income for the quarter was $2.62 billion or $2.06 per diluted share, compared with adjusted income of $2.61 billion or $2.10 per diluted share.

Analysts on average had expected a profit of $2 per share, according to financial markets data firm Refinitiv.

For the year as a whole, adjusted net income was $10.75 billion, up from $10.17 billion last year as the bank managed improved income despite difficulties in some markets, said outgoing chief executive Brian Porter on an earnings call.

“Our results this year clearly reflect solid contributions across our businesses, and the ability to absorb periods of volatility, as evidenced by the challenging conditions faced by our market-sensitive businesses.”

The bank’s international division showed net income up 25 per cent from a year earlier on a constant dollar basis. Canadian banking, wealth management, and its markets declined, though the capital markets performance was better than expected, said Barclay’s analyst John Aiken.

“Scotia kicked off fourth-quarter earnings with a strong beat, led by better than expected performances in capital markets and its international operations,” said Aiken in a note. “International in particular saw strong loan growth and net interest margin expansion.”

Gains in international came from both loan growth and better interest margins as the company focuses on client growth, said Porter.

“We’re very focused on our existing clients and adding in new clients. And that’s been core to that loan growth that you’re seeing in the business. A big part of that loan growth is happening in the U.S. where we’re focused on the Americas strategy.”

Revenue for the quarter totalled $7.63 billion, down from $7.69 billion in its fourth quarter last year.

Provisions for credit losses totalled $529 million, up from $168 million in the same quarter a year ago.

Looking ahead, Porter said there’s room for optimism on the economy.

“Central banks in Canada and the United States appear to be nearing the end of their tightening cycles as inflation finally appears to be slowing. In Canada, the economic growth is moderating, but economic levels of activity remained robust.”

He said the strength of the labour market and strong balance sheets are helping to counterbalance the impact of slower activity in Europe and Asia, while early rate increases by central banks in Latin America means they will likely be able to ease up next year.

This report by The Canadian Press was first published Nov. 29, 2022.

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