Worldwide gains help Scotiabank dividend

Higher transaction fees, Calgary sale offset operating expenses

Scotiabank will hike its dividend 6 per cent after delivering stronger profits in the first quarter, and improved results particularly in its Canadian and international businesses.

Canada’s most international bank said Tuesday that it plans to raise its quarterly dividend by three cents per share to 55 cents. The move came as the bank’s quarterly profits rose to $1.44 billion, or $1.20 per share.

The results marked an increase from $1.25 billion or $1.08 per share a year earlier.

Revenue grew 11 per cent to $4.64 billion from $4.19 billion.

Analysts, on average, had predicted earnings per share of $1.15 on $4.5 billion in revenue, according to Thomson Reuters.

The improvement was due largely to stronger trading revenues, the gain on the sale of its Calgary office, growth in net interest income, higher transaction-based banking fees and lower provisions for credit losses. It was partially offset by a slight increase in operating expenses and the impact of a higher income tax rate.

“Consistent execution of our strategy and focus on our core businesses has led to a strong quarter,” said president and CEO Rick Waugh.

“While we continue to watch global economic conditions closely, diversification across our business and focus on high growth international economies have continued to contribute to our results.”

Scotiabank noted that its results included an after-tax gain of $94 million from the sale of its office in Calgary.

The bank has also been reportedly shopping around its Toronto headquarters to potential buyers.

Breaking down the divisions, Canadian banking operations posted net income of $475 million, an increase of five per cent from $451 million a year ago, aided by stronger residential mortgages and other loans.

Provision for credit losses — or the money set aside to cover bad loans — was $265 million, down $10 million from the same period last year, due largely to lower provisions in retail and commercial banking in Canada, but offset by higher provisions in international banking and global markets.

Scotiabank’s international banking profits rose to $391million from $359 million.

The bank’s Global Banking and Markets division, the trading operations formerly known as Scotia Capital, posted lower profits of $311 million from $335 million.

Total revenues from the operations slipped $11 million to $846 million from a year earlier.

Global Wealth Management net income was $288 million, up from $239 million.

“Scotia is the first bank to not exceed consensus expectations, with its peers reporting to date all coming in well above forecasts,” said Barclays analyst John Aiken, who noted that the bank’s core earnings of $1.12 per share came in line with his expectations.

“Admittedly, the Canadian banks have all benefited from significant gains in trading revenues and largely lower-than-anticipated provisions. The issue remains that Scotia also benefited from these factors and did not generate a substantial beat.”

“We would not be surprised to see Scotia underperform against the group, given that the bar had been raised by the other banks reporting this quarter,” he added.

In its outlook, the bank said its strategy to diversify will help it weather global uncertainty and meet its 2012 targets.

Scotiabank has operations across Latin America and the Caribbean and more than 75,000 employees in 55 countries.