Scotiabank Reports Q1 2024 Financials: Jump In Earnings Offset By Jump In Credit Loss Provision

The Bank of Nova Scotia (TSX: BNS), commonly known as Scotiabank, unveiled its first-quarter financial report for 2024, showcasing a notable surge in net income compared to the same period last year. The bank reported a net income of $2,199 million, a significant leap from $1,758 million in the corresponding quarter of the previous year. Diluted earnings per share (EPS) also experienced a boost, climbing to $1.68 from $1.35 in the prior year.

However, adjusted net income for the first quarter stood at $2,212 million, with diluted EPS at $1.69, slightly lower than $1.84 reported in the previous year. Adjusted return on equity also witnessed a decline, dropping to 11.9% from 13.4% in the previous year.

“The Bank delivered solid earnings this quarter driven by strong revenue growth, margin expansion and expense discipline. I am encouraged by the early progress against our strategic priorities, and the further strengthening of our balance sheet metrics,” said CEO Scott Thomson.

In a breakdown of business segments, Canadian Banking reported adjusted earnings of $1,096 million, reflecting solid revenue growth and expense management, albeit offset by a higher provision for credit losses. International Banking saw a substantial quarter-over-quarter earnings growth of 32%, driven by double-digit revenue growth, though tempered by increased provision for credit losses and expenses.

Global Wealth Management boasted adjusted earnings of $377 million, fueled by higher mutual fund fees and lower expenses, while Global Banking and Markets reported earnings of $439 million, supported by lower provision for credit losses and revenue growth, despite higher expenses.

Provision for Credit Losses

A noteworthy aspect of Scotiabank’s first-quarter report was its provision for credit losses, which totaled $962 million, marking a significant increase from $638 million in the same period last year. This increase was primarily attributed to factors such as retail portfolio growth and the impact of an unfavorable macroeconomic outlook, particularly on commercial, corporate, and Canadian retail portfolios.

The provision for credit losses on performing loans notably declined from the previous quarter, mainly driven by retail credit migration to impaired. However, on impaired loans, the provision surged to $942 million from $562 million, primarily due to higher formations and delinquency trends in International Banking retail portfolios, particularly in Colombia, Chile, and Peru.

The total allowance for credit losses as of January 31, 2024, was $6,597 million, with the allowance on loans decreasing slightly from the prior quarter. Gross impaired loans increased, primarily due to new commercial formations in Canadian Banking and higher retail formations in International Banking.

Scotiabank last traded at $65.90 on the TSX.

Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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