By Nichola Saminather
(Reuters) - Bank of Nova Scotia (TO:BNS), Canada's third-biggest lender, kicked off banks' fourth-quarter earnings on Tuesday with profit that slightly beat expectations as loan and deposit growth offset falling margins and higher credit provisions.
While the bank's international business, which had boosted results last quarter, missed analyst expectations, revenues from the struggling global banking and markets business beat estimates despite a drop in earnings.
Scotiabank expects organic growth in the mid-single-digits in fiscal 2020, executives said on an analyst call on Tuesday. Analysts expect the lender to post adjusted earnings-per-share growth slightly below 6% in 2020.
That anticipated growth is set to follow growth of about 4% expected this fiscal year, the worst expansion rate for Canadian banks since the global financial crisis. Economic uncertainties that have raised the prospect of interest rate cuts at home, higher provisions for loan losses and sluggish deal-making have weighed on Canadian banks in recent quarters.
Scotiabank shares rose 0.2% to C$75.87 in morning trade in Toronto on Tuesday.
Provisions for credit losses during the quarter jumped 28% to C$753 million.
Scotiabank's focus on international markets - particularly the Pacific Alliance trading bloc of Peru, Mexico, Chile and Colombia - has helped it in the past, but Credit Suisse (SIX:CSGN) analysts have identified higher expenses in Mexico and ongoing public unrest in Chile as concerns.
"At first look, we view Q4 as a decent result for BNS overall, although we are concerned about the relatively weak growth in the bank’s international segment, which underpins our outperform rating on the stock," Credit Suisse analyst Mike Rizvanovic wrote in a note, flagging "developing headwinds within most of the bank's key Pacific Alliance footprint."
Adjusted earnings growth of 4.3% in the international division missed estimates, despite outpacing Canada's more staid 1.2% increase. The international unit also posted a 9 basis-point drop in net interest margins, compared with a 2 basis-point rise in Canada.
Adjusted earnings from wealth management rose 10%, thanks to growth in Canada and contributions from acquisitions.
Scotiabank reported adjusted earnings attributable to common shareholders of C$2.23 billion ($1.68 billion), or C$1.82 a share, compared with estimates of C$1.81. That compared with C$2.17 million, or C$1.77 a share, a year ago.
For fiscal 2019, the bank posted a 2.9% increase in profit to C$9.4 billion.
The bank also announced a quarterly dividend of 90 Canadian cents a share.