It may have been the punishing recession since World War Two, the financial landscape strewn with the carcasses of companies big and small, but banks in Canada have proven their strength and flexibility, producing monster profits under brutal conditions.
One in particular, Bank of Nova Scotia (T. BNS), exceeded analysts’ expectations when it announced third-quarter profits, and boosting its dividends to boost.
Scotiabank had adjusted cash profit of $1.22 a share, beating the Street's estimate of $1.19, results that included a $614-million gain, or 53¢ a share, on the sale of the bank's Toronto headquarters. The bank raised its quarterly dividend by two cents to 57 cents a share, which was largely expected.
Scotiabank agreed to sell the 68-storey Scotia Plaza office complex in Toronto to a pair of real estate investment trusts earlier this year.
Why this prosperity amid uncertainty in other sectors? According to a piece this week in the Calgary Herald, "one reason the banks are having an easy time compared to many of their international peers is because of the resilience of the Canadian economy, which has managed to avoid much of the turmoil buffeting other regions."
Another reason, the story continues, is the domestic consumer's appetite for debt, especially mortgages. "Despite lacklustre borrowing by businesses and volatile capital markets revenue, the Canadian banks have managed to meet or exceed Street expectations over the past year, and that's happened largely on the strength of consumer loan volumes, primarily home loans."
According to Scotiabank CEO Rick Waugh, "with net income of $521 million, Canadian Banking had a very strong quarter with very good volume growth, disciplined expense control and lower provisions. There was also good revenue growth in both cards and payments with strong new credit card and chequing account originations across all channels, and strong small business and commercial deposit growth.
"As well, Canadian Banking continued to make solid contributions to Global Wealth Management for mutual funds sold through the branch network.
"International Banking also continued its strong contribution to earnings with net income of $442 million. Solid growth in retail and commercial businesses across Latin America and Asia combined with earnings from acquisitions, mostly in Colombia, drove these results."
Even so, Scotiabank paid about $1 billion for a 51% stake in Colpatria, one of a series of acquisitions it has made since the 2008 financial crisis.
Canadian bank dividend yields outstrip their U.S. counterparts. The top six dividend yields among 17 North American lenders are Canadian, according to data compiled by Bloomberg.
Bloomberg Markets magazine in June ranked Canadian Imperial Bank of Commerce (T.CM), Toronto-Dominion Bank (T.TD), National Bank of Canada (T.NA) and Royal Bank of Canada (T.RY) as the world’s third, fourth, fifth and sixth strongest banks, respectively. Bank of Nova Scotia ranked 18th and Bank of Montreal (T.BMO) was 22nd.
Scotiabank shares gained 70 cents in late Wednesday afternoon trading to $53.60, after achieving a 52-week high of $57.17 in March, climbing out of a gully of $47.54 in early December.
