Revenue growth outpaces expenses despite higher credit loss provisions
The Bank of Nova Scotia has announced its second quarter financial results, with its Canadian banking operations posting adjusted earnings of $1 billion despite ongoing economic uncertainty.
"The bank delivered solid results this quarter against a backdrop of ongoing macroeconomic uncertainty, reporting positive operating leverage driven by revenue growth and continued expense discipline," said Scott Thomson, president and CEO.
"Solid revenue growth outpaced expense growth, resulting in another quarter of positive operating leverage, while provision for credit losses increased compared to the prior year," the bank said in its Q2 2024 earnings report.
The domestic retail banking division benefited from a 7% year-over-year increase in deposits, a "key component" of Scotiabank's refreshed strategy, according to the earnings release.
While Canadian banking net income dipped 4% compared to Q2 2023, this was attributed to "higher provision for credit losses and non-interest expenses, partly offset by higher revenues."
Overall, Scotiabank's net income was $2.092 billion, down slightly from $2.146 billion a year earlier. Diluted earnings per share came in at $1.57, versus $1.68 in Q2 2023.
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Provision for credit losses rose sharply year over year, climbing to $1.007 billion from $709 million in Q2 2023. Provisions for credit losses ratio increased 17 basis points to 0.54%.
"The provision this quarter was driven by retail portfolio growth, provisions related to migrations in the retail portfolio mainly in Canada and Chile, and the continued unfavourable macroeconomic outlook impacting mainly the commercial portfolios," Scotiabank explained.
Despite the challenges, Scotiabank highlighted its capital strength, with its common equity tier 1 ratio rising to 11.6% from 11.5% last quarter.
"I am proud to see Scotiabankers across our global footprint rallying behind our new strategy and coming together to drive our key strategic initiatives forward," Thomson said.
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