Provisions for credit losses continue to rise
Scotiabank posted lower fourth-quarter profits than a year ago as the banking giant continued to increase its credit loss provisions in an uncertain economic environment.
The bank’s net income came in at almost $1.39 billion in Q4 compared with $2.09 billion the same time last year, meaning its adjusted profit per diluted share fell from $2.06 to $1.26 on a year-over-year basis.
It set aside almost $1.26 billion to cover bad loans in the quarter ending October 31, a significant jump from $529 million in Q4 2022, while the bank’s overall revenue was near $8.31 billion compared with almost $7.63 billion the prior Q4.
Scotiabank’s announcement, which marked the first 2023 fourth-quarter earnings release among Canada’s major banks, missed expectations, with analysts on averaging having expected an adjusted profit of $1.65 per share, according to financial markets data firm Refinitiv.
The bank said its net income for the quarter included restructuring charges of $258 million linked to “ongoing efforts to streamline operation processes,” while the exit of certain real estate premises and service contracts cost $63 million and impairment charges of $273 million accrued from the write-down of its investment in associate with China’s Bank of Xi’an Co.
Scott Thomson, the company’s president and CEO, said Scotiabank had focused its efforts on strengthening its balance sheet as it readies for “heightened macroeconomic uncertainty” in the months ahead.
“Strong capital and liquidity ratios, improving loan to deposit ratios and increased allowance for credit losses coverage ratios, position us well as we enter the next phase of our growth strategy,” he said in remarks accompanying the quarterly results.