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Scotiabank posts worse-than-expected profit on international unit as BMO beats estimates

Credit: REUTERS/CHRIS WATTIE

Bank of Nova Scotia's international business posted disappointing third-quarter results on provisions against losses in Latin America while smaller rival Bank of Montreal beat analyst estimates for quarterly profit.

TORONTO, Aug 25 (Reuters) - Bank of Nova Scotia's BNS.TO international business posted disappointing third-quarter results on provisions against losses in Latin America while smaller rival Bank of Montreal BMO.TO beat analyst estimates for quarterly profit.

Most Canadian banks were expected to follow BMO's lead, with strong wealth and trading earnings and some declines in provisions for credit losses (PCLs) from the previous three months helping drive a quarter-on-quarter improvement in earnings.

Bank of Nova Scotia was set to be the only major lender to see an increase in PCLs from the prior quarter, with an 18% rise.

Analysts had expected continued sharp declines in profits from a year ago across the sector as the pandemic's impact lingers.

Loan deferrals improved at both banks with BMO's total value falling 10.2% in Canada and 56% in the U.S from the prior quarter, and Scotiabank's declining 26% in Canada and 1.6% in its international banking unit.

Scotiabank's international banking unit reported adjusted profit attributable to equity holders of C$53 million in the three months through July, down from C$761 million a year earlier, offsetting a 60% jump in earnings from global banking and markets.

"International Banking's earnings were impacted significantly this quarter as the later spread of COVID-19 reduced economic activity across our footprint in Latin America," Canada's third-largest lender said in a statement.

That contributed to a jump in bad loan provisions to C$2.18 billion, nearly three times higher than a year ago and 18% higher than the prior quarter.

Bank of Montreal's provisions, which also more than tripled from a year earlier to C$1.05 billion, fell 6% from the previous three months.

While BMO's Canadian retail banking unit profits halved and its U.S. retail business also saw earnings decline from a year ago, that was offset by growth of over 35% in wealth management and capital markets earnings.

($1 = 1.3216 Canadian dollars)

(Reporting by Nichola Saminather Editing by David Goodman and Chizu Nomiyama)

((Nichola.Saminather@thomsonreuters.com; +1-416-687-7604;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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