(Toronto) Scotiabank became the first major bank to increase its dividend since restrictions to this effect were lifted, as it kicked off this week’s quarterly banking results on Tuesday.
The bank said it was increasing its quarterly dividend by 10 cents to $ 1 per share. It also plans to repurchase up to 24 million of its shares after reporting higher earnings for its fourth quarter, while announcing an accelerated digital migration for its international banking division.
The increase in shareholder payouts and the share buyback program follow a decision by the Office of the Superintendent of Financial Institutions, which earlier this month lifted restrictions it put in place at the start of the month. COVID-19 pandemic, allowing federally regulated banks and insurers to increase their dividends, resume their share buybacks and increase executive compensation.
Scotia CEO Brian Porter said in a conference call with analysts on Tuesday that the payment increases came as the bank largely recovered from the effects of the pandemic.
“Our industries have returned to or exceeded their pre-pandemic profit levels. ”
He said the pandemic had also accelerated the pace of digital adoption in its international division and that this trend had not reversed as the pandemic receded.
“Obviously, the pandemic has changed a lot of things in terms of customer preferences. […] Digital sales in our international operations have doubled since 2019. That’s a big number. ”
As a result, Scotiabank said it was recording a restructuring charge of $ 126 million related to a 10% reduction in the number of its international branches and a 7% decline in its full-time employees.
Cuts to continue in operations in Latin America and the Caribbean, where Scotia said it has seen digital adoption rise from 35% to 50% in most countries, and above 65% in Chile and Colombia.
Porter, however, said the bank is not seeing the same trend nationally.
“The acceleration and adoption of digital internationally is much faster than here in Canada in terms of customer preferences, and we need to be aware of that. ”
The pandemic has also changed home buying habits and contributed to a sharp rise in house prices in Canada, especially relative to profits, but Dan Rees, head of the Canadian banking group at Scotia, said indicated that he expected lower demand in the future.
“We believe the offer supports price appreciation. And while this persists, if rates go up earlier in the year, as I think many of us expect, we expect it to slow demand. ”
He added that the money left as a legacy in families would be an important support for the growth of mortgages in the future, while minimizing the risks in terms of high credit scores of borrowers and lack of growth. home equity line of credit loans.
Profits and revenues up at 4e trimester
Scotiabank posted net income of $ 2.6 billion, or $ 1.97 per share, for the fourth quarter ended October 31, compared to that of $ 1.9 billion, or $ 1.42 per share, in the same quarter last year.
Its revenues totaled nearly $ 7.7 billion, up from $ 7.5 billion a year earlier.
Excluding non-recurring items, Scotiabank reported adjusted earnings of $ 2.10 per share, up from $ 1.45 per share in the fourth quarter of last year.
Analysts on average expected Scotia to make adjusted earnings of $ 1.90 per share, according to data compiled by financial data firm Refinitiv.
The bank’s credit loss provisions fell to $ 168 million in the fourth quarter, from $ 1.13 billion a year earlier and $ 380 million in the third quarter.
“The write-backs of provisions for credit losses supported this performance, and this is mainly due to improved macroeconomic forecasts and strong credit quality,” observed Carl De Souza, Senior Vice President and Head of banking team at DBRS Morningstar.
He pointed out that a key area going forward would be non-mortgage growth, including credit card loan balances, which are not growing much yet as customers still have extra cash.
“Mortgage balances have fueled loan volumes, but going forward we would like to see what happens with non-mortgage loan volumes. ”
Scotiabank said its Canadian banking operations brought in $ 1.2 billion, up from $ 778 million in the same quarter last year.
International banking earned $ 528 million, up from $ 263 million a year ago, while global wealth management earned $ 385 million, up from $ 323 million. Banking services and global markets gained $ 502 million, compared to $ 460 million.
For its full year, Scotiabank said it earned nearly $ 10 billion or $ 7.70 per share, from total revenues of $ 31.3 billion, compared with profit of nearly $ 6.9 billion or $ 5.30 per share. share, on 31.3 billion in revenue a year earlier.
Scotiabank’s adjusted earnings for the full year totaled $ 7.87 per share, compared to $ 5.36 per share last year.