People walk past a Scotiabank branch in Toronto on April 9, 2015.
Nathan Denette/The Canadian Press
Bank of Nova Scotia’s third-quarter profit fell 34 per cent as it set aside nearly $2.2-billion to cover potential loan losses, wiping out earnings from its international banking division and overshadowing strong results from capital markets.
Canada’s third-largest bank earned $1.3-billion, or $1.04 a share, in the three months that ended July 31, compared with $1.98-billion, or $1.50, a year ago.
On average, analysts had expected Scotiabank to earn $1.12 a share, according to data from Refinitiv.
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The bank held its quarterly dividend steady at 90 cents a share, in keeping with guidance from Canada’s banking regulator.
Provisions for credit losses – the funds banks set aside to cover loans that could go sour – surged by 206 per cent from a year ago, as Scotiabank absorbed the impact of the more recent spread of novel coronavirus in Latin American countries where it has a significant presence. The $2.18-billion in new provisions eclipsed the $1.85-billion the bank had already earmarked in the previous quarter, after the onset of the pandemic, but the bank views the third-quarter level as “the peak,” said chief risk officer Daniel Moore.
“We are at the high-water mark. We’re seeing the tide go out from here,” he told analysts on a conference call.
More than four-fifths of the increase in provisions was to cover loans that are still being paid back but could suffer future losses, based on economic models. And much of that increase was in Scotiabank’s international arm, which is concentrated in Mexico, Peru, Chile and Colombia. As a result, profit from abroad that would have been nearly $1.2-billion before provisions and taxes was slashed to just $26-million, down 96 per cent from a year ago.
After a later onset of COVID-19 in Latin America created a lagging impact on the bank’s international results, there are signs that some of those countries are “on a recovering path,” said Ignacio Deschamps, head of international banking and digital transformation. Yet that recovery is likely to take some time. “For sure, 2021 is going to be a transitional year,” he said.
“We are most concerned about the medium-term prospects for the bank’s international business, which we believe could see materially suppressed earnings power in a low-rate environment,” said Mike Rizvanovic, an analyst at Credit Suisse, in a note to clients.
In Canada, Scotiabank still has 236,000 loans worth $41.5-billion – mostly mortgages, but also credit-card debt and personal loans – that are deferring payments, and a further 2,330 loans totalling $18.1-billion in deferrals across its international markets. About 90 per cent of those deferrals are expected to expire by Oct. 31, but Mr. Moore said the bank has seen encouraging signs as 92 per cent of borrowers whose deferrals have already expired are once again on time with their payments.
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Profit from Canadian retail banking, which is Scotiabank’s largest division, fell 53 per cent to $429-million, largely because of higher provisions for loan losses. But lending margins also tightened by 18 basis points, presenting a longer-term challenge to the bank’s key source of profits (100 basis points equal one percentage point).
A buoyant quarter from the capital markets division delivered its best-ever quarterly profit of $600-million, up 60 per cent year-over-year thanks to strong revenue from trading and investment banking, helping to offset some of the pressure on other parts of the bank. And the bank’s wealth management arm, rebuilt through acquisitions in recent years, improved profits by 6 per cent to $321-million amid rebounding markets.
Scotiabank’s capital levels also bounced back, with its common equity Tier 1 (CET1) ratio rising to 11.3 per cent, after falling to the lowest level of any major Canadian bank at 10.9 per cent last quarter.
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HALIFAX – Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.
Federal Natural Resources Minister Jonathan Wilkinson made the announcement today in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.
Wilkinson says that without the money, the subsidiary of Emera Inc. would have had to increase rates by 19 per cent over “the short term.”
Nova Scotia Power CEO Peter Gregg says the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as costs are spread over a number of years.
The utility helped pay for construction of an underwater transmission link between Newfoundland and Nova Scotia, but the Muskrat Falls project has not been consistent in delivering electricity over the past five years.
Those delays forced Nova Scotia Power to spend more on generating its own electricity.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
