Scotiabank optimistic on economic growth
Bank of Nova Scotia, BMO also reported results that beat analysts’ estimates
Scotiabank is finding reasons to feel optimistic about the prospects for Canada’s economic growth on the back of stronger than expected quarterly results.
James McPhedran, executive vice-president of Scotiabank’s Canadian banking division, says its domestic outlook “has gotten consistently better since January or February,” driven by positive sentiment, particularly from its business clients.
“Certainly, when I speak to commercial customers across the country, they’re feeling pretty good about this country’s prospects,” McPhedran told analysts on the bank’s third-quarter conference call.
“It’s not everywhere, but I think the mood is pretty good and we’re seeing it in our results.”
Scotiabank reported improvements in its Canadian retail business were partially driven by loan growth.
However, many observers have noted that debt loads in the country are sky high and a potential economic shock that could hit household incomes could affect some Canadians’ ability to pay back loans.
“What we’re seeing in consumer delinquencies is a much-awaited and very important trend that’s deserving of attention,” McPhedran added.
The looming economic uncertainty was one of the few weak spots on otherwise strong Canadian bank earnings reports that continued on Tuesday, with both Scotiabank and BMO reporting third-quarter results that were ahead of analyst estimates. The Bank of Nova Scotia had $2.1 billion of net income for the three months ended July 31, up 7 per cent from the same quarter last year, and announced its quarterly dividend will go up about 4 per cent. The Bank of Montreal had nearly $1.4 billion of net income over the same period, an increase of 11 per cent from the same time last year, but said its dividend will remain steady. Analyst John Aiken of Barclays Capital said in separate notes that both banks performed better than expected.
Scotiabank said Tuesday that its strength during the quarter came from its Canadian and international banking arms, while its global markets division grew its net income over last year at a more modest pace.
Canadian banking was also a strong point for the Bank of Montreal, as was wealth management, but its U.S. banking division was flat compared with the 2016 third quarter while net income from its capital markets arm was down.