Scotiabank CEO: U.S.-Mexico breakthrough is a positive, relieves ambiguity

Scotiabank's CEO believes this week's breakthrough in trade talks between the United States and Mexico is positive for the bank as it relieves some of the lingering uncertainty about the fate of the North American Free Trade Agreement.

"We look forward to the next piece of NAFTA being solved, hopefully in a number of weeks, with Canada's inclusion," chief executive Brian Porter said Tuesday on a conference call with reporters after the bank's third-quarter results were released.

"To have Mexico and the U.S. reach some sort of an agreement, that's a very positive development. As an organization, we're a believer in the free movement of people and goods across markets and we're looking forward to the next stage in the negotiations."

Porter said he wouldn't speculate on whether there will be a three-way deal by the end of this week to meet a U.S. deadline.

"The market has been hyper focused on the U.S., which is fine, but they sometimes forget what's going on in other parts of the world," Porter said.

He added that Scotiabank's Mexican banking operations performed exceptionally well in the second quarter and Chile, where Scotiabank now owns the third-largest bank, is on track to have four per cent growth in gross domestic product.

Scotiabank has been on a multi-billion-dollar spending spree in recent months, focusing much of its attention on Latin America.

It purchased a 68 per cent stake in Chilean banking operation BBVA Chile for $2.9 billion, in a deal that closed in the most recent quarter.

Costs related to international acquisitions — primarily a $320-million provision for acquired credit losses — pushed down the Scotiabank's third-quarter profit to $1.94 billion.

Overall provision for credit losses — or the money set aside to cover bad loans — it increased to $943 million, compared with $573 million a year ago, due to the BBVA acquisition. That was partly offset by a lower provision in Canada.

Scotiabank said its third-quarter profit amounted to $1.55 per diluted share, down from $2.10 billion or $1.66 per diluted share a year ago.

The bank's adjusted earnings, which excluded the acquisition-related items, were $2.26 billion or $1.76 per diluted share in the quarter, up from $2.12 billion or $1.68 per diluted share a year ago.

The adjusted earnings just beat analysts' expectations for a profit of $1.75 per share, according to Thomson Reuters Eikon.

Scotiabank's international division experienced double-digit growth in loans and earnings in the Pacific Alliance countries — Mexico, Peru, Chile, and Colombia — and solid credit quality, Porter told analysts Tuesday.

"Our financial performance in Mexico was very strong again this quarter, reflecting positive economic growth and strong demand across all products," Porter said.

Overall, Scotiabank's personal and commercial banking businesses — which generate 80 per cent of its overall earnings — delivered strong growth and improved returns, Porter said.

The global banking and markets division, he added, delivered consistent results compared with last year.

Scotiabank's Canadian results were driven by asset growth in personal and commercial banking, credit cards, auto finance and mortgages as well as wider margins and improved credit quality, Porter said.

The Canadian banking segment reduced its provision for credit losses to $181 million in the three months ended July 31, down from $224 million in the 2017 third quarter.

Scotiabank's Canadian wealth management operations are also undergoing a number of changes since the divestiture of HollisWealth last year.

It bought Canadian investment manager Jarislowsky Fraser for $950 million in February and announced a big play to expand its customer base in May with a deal to acquire physician-focused financial adviser MD Financial Management for $2.5 billion, which is expected to close this fall.

Along with its third-quarter results, Scotiabank announced Tuesday that its quarterly dividend will rise by three cents to 85 cents per share, payable Oct. 29.