Bank of Nova Scotia (Scotiabank) missed analystsâ€™ estimates as the lender failed to capitalise on rising interest rates and took a bigger provision for potentially souring loans than expected.
Net interest margin â€” the difference between what the bank earns from loans and what it pays depositors â€” was 2.13% in the fiscal second quarter, compared with 2.11% in the previous three months and 2.23% a year earlier. Excluding some items, profit totalled C$1.70 a share, less than the C$1.76 average estimate of 11 analysts in a Bloomberg survey.
Higher set-asides for credit losses hurt net income in both the Canadian banking and the global banking and markets segments. The Canadian banking segment also dealt with higher non-interest expenses, with revenue up from a year earlier countering the increase.
Scotiabankâ€™s international division â€” centered on Chile, Colombia, Mexico and Peru â€” sets the lender apart from Canadaâ€™s North America-focused banks, with the unit weighing on the lenderâ€™s shares in recent years. Scott Thomson, who took over as Scotiabankâ€™s chief executive officer earlier this year, said in February that the divisionâ€™s â€œreturns are not commensurate with our expectations in certain countriesâ€ and that the firm is â€œin the process of assessing our international business mix.â€
The unitâ€™s net interest margin rose to 4.12% in the three months through April from 4% in the fiscal first quarter. The Federal Reserve said that it ended an enforcement action against the Canadian lender related to its anti-money-laundering controls.