Scotiabank gains on strength of Pacific units

Continued from FP1

“We have reshaped the bank while reinforcing our core strengths, and our results confirm it,” said Bill Downe, chief executive of BMO Financial Group, on a conference call. “Our business model works.”

Meanwhile, Bank of Nova Scotia reported fiscal first-quarter net income of $2-billion compared to $1.81-billion last year, up 11 per cent year-over-year and slightly above expectations of $1.919-billion, according to analysts surveyed by Bloomberg.

The bank also reported earnings per share of $1.58, up from $1.44 a year earlier — one cent above the $1.57 expected by analysts, according to those surveyed by Bloomberg.

Scotiabank’s earnings were driven in part by record results in international banking, which saw earnings of more than $500 million, “underpinned by solid growth in our key Pacific Alliance countries where we continue to see great potential.”

Scotiabank has the largest international presence among the big Canadian banks, with a footprint in countries such as Mexico, Chile and Peru.

Brian Porter, Scotiabank’s president and chief executive, said Tuesday he was pleased with its quarterly results, as the business is performing “exceedingly” well in these key countries.

“The person on Main Street, whether they’re in Mexico City, Guadalajara, Monterrey or any other city in the Pacific Alliance, our day-to-day business (in the Pacific Alliance) is somebody purchasing a home or planning for retirement,” he said on a call with analysts.

“That’s not changing in terms of what is going on in somebody’s Bloomberg screen ... What is going on on Main Street is different than what’s going on in terms of the latest rhetoric out of Washington or the latest tweet.”

While BMO’s shares rose two per cent to $100.63 on Tuesday, Scotiabank’s slipped by 2.6 per cent to $77.25, a sign of just how much the market is expecting from the banks.

“In a world where all the banks are not just beating consensus EPS expectations, but blowing them out of the water, an in-line quarter stands out for all the wrong reasons,” said Meny Grauman with Cormark Securities in a note on Tuesday.

BMO saw its total provisions for credit losses (PCL) drop by $10 million to $173-million this quarter, primarily due to lower provisions in Canadian personal and commercial banking and net recoveries in capital markets, the bank said.

Scotiabank, however, saw its PCL rise by $14 million to $553-million during the same period — still lower than analysts estimated — as higher retail and commercial provisions in Canadian and international banking were offset in part by significantly lower provisions in the energy sector.

“For the most part, the energy story is behind us,” Scotiabank chief financial officer Sean McGuckin told reporters.