POSITIVE OUTLOOK

Bank’s earnings growth comes against backdrop of real-estate slowdown

Scotiabank reports better-than-expected earnings,

The Bank of Nova Scotia’s second-quarter earnings beat expectations, fuelled by operations in Latin America and at home despite a slowdown in the Canadian housing market.

Canada’s third-largest lender on Tuesday reported a nearly 4-cent jump in net income attributable to common shareholders. Its international division delivered14-per-cent earnings growth and its Canadian banking division saw a 5-percent year-over-year increase.

Scotiabank was the fourth of Canada’s biggest banks to report earnings for the threemonth period ended April 30 that beat expectations against a backdrop of slowing real-estate activity and tighter lending guidelines for uninsured mortgages as of Jan. 1.

However, residential mortgage balances at Scotiabank during the period grew by six per cent, compared with last year, to $203.8 billion, while the value of new mortgages issued during the period fell to $8.9 billion from $9 billion a year earlier and $10.3 billion in the previous quarter.

Scotiabank chief financial officer Sean McGuckin said the bank is still expecting 5-percent growth for its 2018 finan- cial year, helped by the pullforward effect of buyers rushing to lock in home loans in the previous quarter ahead of the new rules.

“We’re still very optimistic … With all the other growth levers we have in the bank, in international banking and in commercial lending, we can overcome any slowdown or moderation in our mortgage growth,” he told reporters on Tuesday.

Scotiabank’s net income attributable to common shareholders during the quarter end- ed April 30 was $2.04 billion, or $1.70 per diluted share, up from $1.97 billion, or $1.62 per diluted share, a year earlier. On an adjusted basis, the profit amounted to $1.71 per diluted share, compared with analysts’ expected earnings per share of $1.67, according to Thomson Reuters Eikon.

The lender’s Canadian banking division saw a 5-per-cent increase in net income attributable to equity holders to $1.02 billion, while its international banking arm saw an even bigger increase of 14 per cent to $675 million.

Scotiabank chief executive Brian Porter said its earnings at home were driven by solid asset growth led by commercial and small business, auto and mortgages, as well as margin expansion in a rising rate environment. Beyond Canada’s borders, the lender’s earning growth was driven by momentum in the Pacific Alliance countries of Mexico, Chile, Colombia and Peru.

“International banking delivered another strong quarter, driven by double-digit loan growth in the Pacific Alliance, positive operating leverage and solid credit quality,” he told financial analysts.

The Pacific Alliance trade bloc has been a key focus for Scotiabank, which has announced several regional acquisitions and investments as it looks to expand in Latin America.

Positive report was driven by momentum in Mexico, Chile, Colombia and Peru