Scotiabank Misses Quarterly Profit Guidance, Predicts ‘Marginal’ Growth in 2024 – 11/28/2023 at 4:47 p.m

(Adds details of conference call and actions in paragraph 3) by Nivedita Balu and Niket Nishant

Bank of Nova Scotia BNS.TO on Tuesday forecast a “marginal” increase in profits in 2024, after the Canadian bank missed its fourth-quarter profit estimates as the uncertain economic climate prompted it to set aside more funds to guard against bad debt protect.

Scotiabank opens earnings season for Canadian banks, capping a fiscal year marked by economic uncertainty, rising loan loss provisions as more consumers struggled to repay their mortgages, layoffs to cut costs and increased spending.

The bank’s shares fell nearly 5% in early trading, dragging Canada’s main stock index .GSPTSE.

Lenders have braced for a rise in defaults as the impact of the central bank’s restrictive monetary policy is felt and the economy flirts with recession.

The bank said profits for the 2024 financial year to October 31 would be hit by “slowing economic growth in its markets and increased regulatory capital requirements” but that it would also benefit from asset interest generators.

“We expect a challenging environment for consumers and businesses to continue,” Chief Risk Officer Phil Thomas told analysts, citing Canada’s weak economic growth, persistent inflationary pressures and an uncertain outlook. Interest rate cut.

Chief Financial Officer Raj Viswanathan said deposit and loan growth is also expected to slow from 2023, noting that savings in Canada have begun to fall due to inflation at multi-year highs, leaving consumers with less cash on hand .

For the fourth quarter, Scotiabank increased its bad debt provisions to C$1.26 billion ($927.90 million) from C$529 million a year ago, due to the unfavorable economic outlook and “ongoing uncertainty about the impact of rising interest rates.”

Revenue at Canada’s largest office fell 30.8%, while expenses rose 10% on an adjusted basis due to higher salaries and other costs.

The bank said adjusted net income fell 36% to C$1.67 billion, or C$1.26 per share, well below analyst forecasts of C$1.65 per share, according to LSEG data.

“Scotiabank had, on the face of it, a very difficult quarter, driven by a significant increase in loan losses in the Canadian retail lending sector, a decline in revenues and an increase in expenses – both elements that we believe will be of concern to investors. said Mike Rizvanovic, analyst at KBW.

While the bank outlined some of its priorities for 2024, including strengthening its retail banking business, operational efficiency and technology, Chief Executive Scott Thomson, who took over earlier this year, will present its overall growth strategy for the bank at the investor conference day on 13. December.

Last month, the bank said it would cut about 2,700 jobs globally, or about 3% of its workforce. Scotiabank’s efforts to streamline operations resulted in a restructuring charge of 258 million Canadian dollars.

Net interest income increased as the Bank of Canada was able to charge higher interest rates on loans due to aggressive rate hikes.

The indicator, which measures the difference between what banks earn on loans and what they pay out on deposits, rose 1% to 4.67 billion Canadian dollars.

($1 = 1.3579 Canadian dollars)

Jillian Snider

Extreme problem solver. Professional web practitioner. Devoted pop culture enthusiast. Evil tv fan.

Leave a Reply

Your email address will not be published. Required fields are marked *