Scotiabank CEO ‘cautiously optimistic’ about economic outlook despite profit drop to $1.9B

Bank of Nova Scotia’s president and chief executive says he’s “cautiously optimistic” about the economy’s ability to bounce back from COVID-19 next year.

Brian Porter told analysts Tuesday that he is feeling reassured by countries that have doled out billions in pandemic relief, cut interest rates and offered wage support.

“We are seeing clear evidence that the stimulus is having the desired impact across our footprint,” he said on a conference call to discuss the bank’s latest financial results.

“In Canada, retail spending has reached pre-pandemic levels, the housing market is experiencing robust growth and auto sales have largely recovered.”

Porter hadn’t factored in the potential rollout of a COVID-19 vaccine, but if Pfizer, Moderna or AstraZeneca get the go-ahead to inject people with their early vaccine candidates, he said his optimism would grow even more.

His remarks came as most of the bank’s consumer relief programs that targeted Canadians hit hard by the pandemic are expiring and as the bank topped analyst expectations in its latest quarter.

Profit down

Scotiabank reported a fourth-quarter profit of $1.9 billion or $1.42 per diluted share, down from $2.3 billion or $1.73 per diluted share in the same period a year earlier.

On an adjusted basis, the bank earned $1.45 per diluted share for the quarter ended Oct. 31, down from an adjusted profit of $1.82 per diluted share last year.

Analysts on average had expected Scotiabank to earn and adjusted profit of $1.22 per share, according to financial data firm Refinitiv.

Revenue totalled $7.5 billion, down from nearly $8 billion in its fourth quarter last year.

The bank was weighed down by record levels of support it offered through mortgage, credit card and personal loan programs, and funds it had to stow away in the event that customers can’t pay off their loans.

Throughout the pandemic, Porter said the bank doled out $120 billion in support for customers, who increased their adoption of digital offerings by 90 per cent in the last year.

Scotiabank’s provisions for credit losses — money it puts aside to account for potential bad loans — in its latest quarter totalled $1.1 billion, up from $753 million a year ago, but down from nearly $2.2 billion in the third quarter.

Scotiabank executives indicated that they expect such provisions to continue to sink as the bank and economy rebound.

“We expect 2021 will be a transition year toward a return to the full earnings power of the bank,” said Porter.

“The bank’s capital position is strong and will remain so in 2021 as the focus shifts from capital adequacy to capital deployment. I am confident we are well-positioned to take advantage of opportunities as they arise.”

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