Scotiabank building presence in South, Central America

The Bank of Nova Scotia says it's seeing some good growth from its international operations — particularly in Asia — as it continues to work on increasing its presence in Central and South America.

"To drive the greatest growth, we remain focused on building scale in our highest priority markets of Mexico, Peru, Colombia and Chile," Scotiabank president and CEO Brian Porter told analysts during a conference call Tuesday.

Touted as Canada's most international lender, Scotiabank currently has a presence in more than 55 countries.

Profit up on wealth management, insurance

Also on Tuesday, the bank raised its dividend as it reported increased profits in the latest quarter, boosted by its wealth management and insurance businesses and the sale of its stake in money manager CI Financial Corp.

The bank reported a profit of $2.35 billion, or $1.85 per diluted share, for the quarter ended July 31. That compared with a profit of $1.75 billion, or $1.36, in the same period a year earlier.

Scotiabank announced a deal in May to sell more than two-thirds of its interest in CI Financial. The sale boosted the bank's quarterly results with after-tax gain of $555 million, or 45 cents per share.

Scott McGuckin, Scotiabank's chief financial officer, told CBC News the bank plans to invest the capital from the sale across its business lines.

In an interview with CBC's The Exchange, McGuckin said the bank is interested in investing more in key markets such as Mexico, Peru and Chile.

"We’re in 55 countries. We’ve got a lot of countries that are doing well, some are doing all right and some are just finding their feet in terms of economic recovery," he said.

"Our Latin American region that is made up of the countries we focus on – Mexico, Colombia through Chile, we saw good double-digit growth for that division, Asia was also up double digit, but the Caribbean and Central America region was down from a year ago and taht region is still going through a protracted economic recovery. We found volume growth a bit lower there, loan losses a bit higher there, but overall in the key markets we focus on, we expect longer-term growth." 

McGuckin said the bank's fixed income business is down, but advisory business is up this quarter.

"We’ve got many different business, some perform better than others, but when you put it all together at any point in time, we deliver to our shareholders good sustainable, predictable earnings," he said.

Excluding the deal and other one-time items, the bank's adjusted net income was $1.79 billion, up eight per cent from $1.65 billion on adjusted earnings per diluted share of $1.40. Analysts had expected adjusted earnings per share of $1.41.

Return on equity was 20.6 per cent, compared with 17.2 per cent at the same time last year. Revenues were $6.48 billion compared with $5.51 billion.

Dividend up 2 cents

The earnings prompted the bank to increase its quarterly dividend by two cents to 66 cents per share.

Its global wealth and insurance arm earned $846 million, helped by the CI Financial deal and continued favourable conditions from the markets. Without the CI transaction, net income in the division grew by six per cent.

Profits from its personal and commercial banking in Canada division rose three per cent to $565 million, boosted by a hike in loans, deposits and higher fees and commissions. It also saw higher increases in loan losses, but said that was mainly due to an increase business volume.

Porter said these latest results continue to keep the lender on track.

"Executing on our strategic plan, which includes a strong focus on superior customer relationships, will continue to drive growth as well as consistent and sustainable earnings," he said in a news release.

Barclays analyst John Aiken said in a note prior to the bank's conference call, that the results are pretty much in line with expectations.

'Too many issues'

"While Scotia's headline earnings and dividend increase are in line with expectations, there are just too many issues in the quarter to feel positive and we would not be surprised if it posted some under performance against its peers today," he wrote.

Darko Mihelic, an analyst with RBC Capital Markets, said that he had expected Scotiabank's "usually strong cost control culture" to help rein in some of its quarter-over-quarter expenses growth.

"Overall, we view BNS's earnings results as disappointing as they fell short of our expectations in all segments other than wholesale banking and generally the 'other' segment helped to offset some of the weakness in the 'core' segments," Mihelic wrote in a note.

It seemed like investors may have agreed, as Scotiabank's shares fell $1.67 or 2.23 per cent to $72.52 midday Tuesday on the Toronto Stock Exchange.