Scotiabank profit hits record in second quarter

Scotiabank boosted its second-quarter net profit by 14 per cent to $1.8 billion, helped by its Canadian banking and global wealth and insurance segments.

That's up from $1.58 billion in the same quarter of 2013.

Scotiabanksaid its Canadian banking segment achieved double-digit growth in both credit card and automotive lending volumes.

Earnings per share diluted were $1.39 compared with $1.22 year-over-year.

Adjusted diluted earnings per share were $1.40, beating analysts' estimates of $1.31.

Scotiacontinued the pattern of better than anticipated results- Bank analyst John Aiken

Scotiabank is the third of the big banks to report second-quarter earnings after Royal Bankand TD Bank, which also posted healthy profits and beat expectations.

Its total revenue was $5.7 billion compared with $5.3 billion in the same quarter last year and return on equity was 16.3 per cent, down from 16.5 per cent.

The provision for credit losses was $375 million in the quarter, up $32 million from the same period last year. The bank said the year-over-year increase was primarily due to higher provisions in its international banking segment.

Barclays analyst John Aiken called it an impressive quarter for Scotiabank, well ahead of expectations. But he said the uptick in provision for credit losses may be an issue for some investors.

"Scotia continued the pattern of better than anticipated results for the Canadian banks, however, its approach was decidedly different than what investors saw with Royal and TD last week," Aiken said in a research note.

• TD Bankprofit comes in at just under $2B

• Royal Bankprofit up 15% to $2.2 billion

"Scotia's bottom line did not benefit from better than anticipated credit quality. In fact, it saw some modest deterioration in domestic credit quality and incurred higher provisions in the Caribbean, driving up the total for International, despite moderation in Latin America."

The bank said its global wealth and insurance segment benefited from favourable market conditions.

Earlier this month, Scotiabank announced that it wants to sell its 37 per cent stake in CI Financial Corp., worth about $3.8 billion, saying it believes it can more profitably deploy the capital elsewhere.

"While we have not yet made any decisions on the timing or the method of affecting this disposition, our intention is for an orderly transaction or series of transactions," said Scotiabank president and CEO Brian Porter in a conference call with analysts.

"We don't know how this is going to unfold, whether it's done in one transaction or a series of transactions and the timing of the disposition is uncertain to date," he added.

In the quarter, Scotiabank's ING Direct Canada was renamed Tangerine.

Earlier this month, Scotiabank signed a deal to buy a 20 per cent stake in Canadian Tire's financial services business for $500 million in cash as part of a strategic partnership between the companies. Scotiabank has said it will also provide up to $2.25 billion in credit card receivables financing for Canadian Tire's financial services business.