Scotiabank reports improved second quarter earnings of $980 million
27 Maggio 2008 - 6:26PM
PR Newswire (US)
Second quarter highlights: TORONTO, May 27 /PRNewswire-FirstCall/
-- Scotiabank today announced second quarter net income of $980
million, down 6% compared with the same period last year, but up
$145 million or 18% over last quarter. Diluted earnings per share
(EPS) were $0.97 compared to $1.03 in the same period last year and
$0.82 last quarter. Return on equity remained strong at 21.4%.
"Scotiabank's performance was solid during a challenging quarter
for global financial markets," said Scotiabank President and CEO
Rick Waugh. "Compared to the same period one year ago, we achieved
higher net interest income, and Domestic Banking, Scotia Capital
and International Banking experienced strong asset growth. As well,
this quarter's results benefited from the positive contributions of
recent acquisitions. However, these gains were offset by the
negative impact of foreign currency translation, higher provisions
for credit losses, weaker capital market revenues and an increase
in expenses incurred on revenue growth initiatives. "Our Domestic
Banking platform is performing very well in a competitive market.
The division experienced strong growth in assets, with market share
gains in residential mortgages, total deposits and mutual funds.
"The combination of organic growth and contributions from
acquisitions fuelled a solid year-over-year increase in earnings in
International Banking. These results were achieved notwithstanding
the negative impact of foreign currency translation due to the
rapid rise of the Canadian dollar in 2007. We continue to see
assets increasing in all regions with solid contributions from our
most recent acquisition in Chile and on-going growth from Peru and
the Caribbean and Central America. "Scotia Capital's results showed
strength during a turbulent period, with record results in
ScotiaMoccatta, strong loan growth, and widening spreads. However,
trading results were below the high levels a year ago, but
rebounded from the first quarter. "In a period when many financial
institutions experienced significant problems in global and
domestic capital markets, our strong risk management and moderate
exposures resulted in minimal writedowns. Our loan portfolios
performed very well with Scotia Capital showing net recoveries, and
loan losses being well contained in other business lines. "We
continue to prudently manage our capital position to ensure that it
is adequate to support strategic acquisitions and ongoing business
development opportunities. "Despite difficult markets, we are on
track to achieve three of our four key financial and operational
targets: ROE, productivity and maintaining strong capital ratios.
This is a reflection of the relative strength of our businesses and
strategies. However, the challenging global financial markets
continue to impact earnings and, as a result, it is unlikely that
we will meet our EPS growth objective set at the end of last year.
At the same time, our rebound in earnings this quarter, the
continued solid asset growth in all three business lines and
improved funding costs, all point to a stronger second half in
2008. In view of these factors and our strong and improving capital
position, we increased our quarterly dividend 2 cents to 49 cents
per common share. This extends our track record of providing
shareholders with consistent dividend growth." Year-to-date
performance versus key 2008 financial and operational objectives
was as follows:
-------------------------------------------------------------------------
1. Target: Earn a return on equity (ROE)(1) of 20 to 23%. For the
six months Scotiabank earned an ROE of 20%.
-------------------------------------------------------------------------
2. Target: Generate growth in earnings per common share (diluted)
of 7 to 12%. Our year-over-year growth in earnings per share was
negative 12%.
-------------------------------------------------------------------------
3. Target: Maintain a productivity ratio(1) of less than 57%.
Scotiabank's ratio was 55.6% for the six months.
-------------------------------------------------------------------------
4. Target: Maintain sound capital ratios. At 9.6%, Scotiabank's
Tier 1 capital ratio remains strong by Canadian and International
standards. (1) Refer to non-GAAP measures discussion below. Live
audioWeb broadcast of the Bank's analysts' conference call. See
below for details. As at and For the for the three months ended six
months ended
-------------------------------------------------------------------------
April 30 January 31 April 30 April 30 April 30 (Unaudited) 2008
2008 2007 2008 2007
-------------------------------------------------------------------------
Operating results ($ millions) Net interest income 1,873 1,814
1,794 3,687 3,570 Net interest income(TEB(1)) 1,973 1,932 1,903
3,905 3,784 Total revenue 3,172 2,839 3,102 6,011 6,211 Total
revenue(TEB(1)) 3,272 2,957 3,211 6,229 6,425 Provision for credit
losses 153 111 20 264 83 Non-interest expenses 1,794 1,669 1,726
3,463 3,450 Provision for income taxes 209 193 286 402 563
Provision for income taxes(TEB(1)) 309 311 395 620 777 Net income
980 835 1,039 1,815 2,059 Net income available to common
shareholders 958 814 1,028 1,772 2,040
-------------------------------------------------------------------------
Operating performance Basic earnings per share($) 0.97 0.83 1.04
1.80 2.06 Diluted earnings per share($) 0.97 0.82 1.03 1.79 2.04
Return on equity (%)(1) 21.4 18.3 22.4 20.0 22.4 Productivity
ratio(%) (TEB(1)) 54.8 56.5 53.8 55.6 53.7 Net interest margin on
total average assets (%) (TEB(1)) 1.76 1.79 1.93 1.78 1.92
-------------------------------------------------------------------------
Balance sheet information ($ millions) Cash resources and
securities 129,749 130,893 131,296 Loans and acceptances 267,875
260,501 226,310 Total assets 452,573 449,422 411,710 Deposits
322,438 316,797 291,603 Preferred shares 2,210 1,865 1,290 Common
shareholders' equity 18,213 18,128 18,705 Assets under
administration 202,266 195,155 208,426 Assets under management
32,917 31,704 30,448
-------------------------------------------------------------------------
Capital measures(2) Tier 1 capital ratio (%) 9.6 9.0 10.1 Total
capital ratio (%) 11.7 10.2 11.4 Tangible common equity to risk-
weighted assets (1) (%) 7.5 7.2 8.0 Risk-weighted assets ($
millions) 218,878 234,876 213,078
-------------------------------------------------------------------------
Credit quality Net impaired loans(3) ($ millions) 845 689 579
General allowance for credit losses ($ millions) 1,323 1,298 1,298
Net impaired loans as a % of loans and acceptances(3) 0.32 0.26
0.26 Specific provision for credit losses as a % of average loans
and acceptances (annualized) 0.24 0.18 0.08 0.21 0.10
-------------------------------------------------------------------------
Common share information Share price ($) High 50.00 54.00 54.73
54.00 54.73 Low 42.00 43.10 49.34 42.00 48.80 Close 47.82 48.19
53.39 Shares outstanding (millions) Average - Basic 986 985 992 985
992 Average - Diluted 992 992 1,001 992 1,001 End of period 987 985
990 Dividends per share($) 0.47 0.47 0.42 0.94 0.84 Dividend yield
(%) 4.1 3.9 3.2 3.9 3.2 Dividend payout ratio(4) (%) 48.4 56.9 40.6
52.3 40.9 Market capitalization ($ millions) 47,194 47,487 52,840
Book value per common share($) 18.45 18.40 18.90 Market value to
book value multiple 2.6 2.6 2.8 Price to earnings multiple
(trailing 4 quarters) 12.7 12.5 13.7
-------------------------------------------------------------------------
Other information Employees(5) 62,143 62,002 55,926 Branches and
offices(5) 2,529 2,458 2,242
-------------------------------------------------------------------------
(1) Non-GAAP measure. Refer to below for a discussion of these
measures. (2) Effective November 1, 2007, regulatory capital ratios
are determined in accordance with Basel II rules. Comparative
amounts for prior periods were determined in accordance with Basel
I rules. (3) Net impaired loans are impaired loans less the
specific allowance for credit losses. (4) Represents common
dividends for the period as a percentage of the net income
available to common shareholders for the period. (5) Certain
amounts for prior periods have been restated to include final
numbers for all new acquisitions. Strategies for success The
volatility in global financial markets carried forward into the
second quarter. Our Bank met the challenges and results improved
versus the first quarter - due to continued solid performances from
most areas of our businesses. We remain confident that we will
achieve most of our key financial and operational objectives, but
it is unlikely that we will meet our earnings growth objective. We
have the right growth strategy, focused on diversification by
business and by geography, and the right priorities to ensure our
long-term success: sustainable revenue growth, effective capital
management and leadership. We continued to find new ways to
generate and sustain revenue growth by helping our customers become
better off financially. During the quarter, we introduced
innovative new products and services, such as the Scotia Global
Climate Change Fund - the first of its kind in Canada. We launched
our "Bank the Rest" savings program, which helps customers increase
their savings every time they use their ScotiaCard to make a point
of sale purchase. We continued to use our capital prudently keeping
our balance sheet strong yet being able to support overall asset
growth and strategic acquisitions - such as our purchase of certain
assets from Grupo Altas Cumbres of Chile. These assets include
Banco de Antigua in Guatemala, and the business assets of Banco de
Ahorro y Credito Altas Cumbres in the Dominican Republic, and Banco
del Trabajo in Peru which was announced subsequent to quarter end.
In terms of leadership, we have tremendous bench strength and
continue to develop leaders by broadening their experience in
different businesses and markets. We also enhanced our people
development with the launch of an internal online resource site
that provides Scotiabank's current and aspiring leaders with tools
to support career development plans. Although the start of the year
has been challenging, we achieved a rebound in earnings this
quarter. This overall performance, combined with improved funding
costs, continued solid asset growth in all three of our business
lines, and our effective risk and cost management, points to a
stronger second half in 2008. As well, we continue to believe in
the ability of our great team of people to effectively execute our
strategies and priorities over the balance of the year. (signed)
Rick Waugh President and Chief Executive Officer 2008 Objectives
-Our Balanced Scorecard
-------------------------------------------------------------------------
Financial - Return on equity of 20-23% - Diluted earnings per share
growth of 7-12% - Long-term shareholder value through increases in
dividends and stock price appreciation
-------------------------------------------------------------------------
Operational - Productivity ratio of