Scotiabank profit up 9% amid global uncertainty

Canada’s economic outlook positive for 2017, CEO says

Scotiabank boosted its fourth-quarter net income by 9 per cent, capping off a year in which Canada’s big banks went up against rock-bottom interest rates, volatile stock markets and global economic and political uncertainty.

The bank, which was the first of the big lenders to report earnings results for the final quarter of the year, had $2.01 billion of net income for the three months ended Oct. 31, up from $1.84 billion a year earlier.

That amounted to $1.57 per share, up 8 per cent from $1.45 per share in the fourth quarter last year.

For the full 2016 financial year ended Oct. 31, Scotiabank had $7.37 billion of net income, or $5.77 per diluted share — up from $7.21 billion or $5.67 per share in fiscal 2015.

Royal Bank will report its results on Wednesday, followed by CIBC and TD Bank on Thursday. Bank of Montreal will wrap up the earnings parade on Tuesday.

Scotiabank CEO Brian Porter said he’s anticipating that the Canadian economy will improve over the next year.

“It would appear the market is discounting a bigger impact to Mexico than we believe is realistic.” BRIAN PORTER SCOTIABANK CEO

“Compared to this time last year, the narrative around Canada’s economic outlook is more positive,” he said during a conference call to discuss the bank’s results. “Despite some ongoing challenges in certain parts of the country, the bank is forecasting improved growth in 2017.”

Barclays analyst John Aiken said in a note to clients that Scotiabank’s exposure to Latin America, in particular Mexico, has been a concern for investors since the U.S. election.

President-elect Donald Trump made several antagonistic comments about Mexico during the campaign, leading many to believe his win will be negative for that country, particularly with regards to trade.

But Porter said he doesn’t think Mexico’s economy will suffer as much as anticipated.

“It would appear the market is discounting a bigger impact to Mexico than we believe is realistic,” he said.

“We remain confident in our medium-term growth objectives to Mexico, and we will continue to actively and prudently manage our businesses. We remain committed to the bank’s overall medium-term objectives, including those for both international banking and the Pacific Alliance that we provided at our investor day in Mexico City.”

The bank’s chief risk officer Stephen Hart said he’s confident the bank has moved past the key issues surrounding the decline in crude prices.

Scotiabank’s provision for credit losses was $550 million, down $1million from a year earlier.

For the full year, provisions for credit losses totalled $2.41 billion, up from $1.94 billion in fiscal 2015, with all of the increases in the first two quarters.