TORONTO: Profit at Bank of Nova Scotia rose 18 percent in its first quarter on the back of stronger Canadian retail and international banking income, prompting the lender to raise its quarterly dividend.
However, Scotiabank's shares eased on Tuesday morning as the profit -- despite beating analysts' consensus estimates slightly -- failed to satisfy expectations built up by strong earnings reported by the bank's rivals over the past several weeks.
Canada's No. 3 bank earned C$1.17 billion ($1.21 billion), or C$1.07 a share, in the quarter ended Jan. 31. That was up from a profit of C$988 million, or 91 Canadian cents a share, in the year-before period.
On an adjusted basis, the bank earned C$1.09 a share, which beat the C$1.06 a share expected by analysts.
The results cap a quarter in which Canadian bank earnings as a group blew past expectations due mainly strong growth in consumer loans and deposits. The growth defied predictions that lending would dry up.
About 15 minutes into trading, the bank's shares were down 1.3 percent at C$59.37 on the Toronto Stock Exchange, underperforming the market's bank group as a whole.
"Coming in in line is almost a bit disappointing this quarter because the bank group largely exceeded expectations," said Craig Fehr, an analyst at Edward Jones in St. Louis, Missouri.
DIVIDEND HIKE
The bank raised its quarterly dividend for the first time since the financial crisis, following the lead of Toronto-Dominion Bank last week.
Scotiabank lifted the payout by 3 Canadian cents to 52 Canadian cents a share.
Coming into the quarter, analysts had predicted Scotiabank might wait until later in the year to raise its dividend. Royal Bank of Canada and Canadian Bank of Commerce have suggested their dividends could rise later in the year.
"It certainly puts more pressure on the other banks to raise their dividends," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.
He said the strong quarter represented a "clean sweep" for the banks.
Scotiabank's core Canadian retail lending operation earned C$496 million, up 14 percent, while international banking -- which consists of extensive operations in Latin America and Asia -- earned C$342 million, up 35 percent.
This more than offset weakness at the Scotia Capital investment bank, whose income fell 19 percent to C$308 million.
Loan-loss provisions fell to C$269 million from C$371 million as the stronger economy reduced foreclosures and loan defaults.
Return on equity was 18.7 percent, up from 17.4 percent last year.
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