Scotiabank posts lower profit amid uncertainty related to U.S. tariffs

Yahoo

27-05-2025

Bank of Nova Scotia reported slightly lower second-quarter profits as it kept aside a higher amount of money to tackle loans that may potentially go bad, which it said reflects 'the continued uncertainty related to U.S. tariffs.'
Its net income for the three months ending April 30 was $2.03 billion, compared to $2.09 billion during the same period a year ago, resulting in net earnings per share of $1.48.
Scotiabank's adjusted net income — which removes the impact of non-recurring items — was $2.07 billion, compared to $2.10 billion a year ago, resulting in adjusted earnings per share of $1.52, below analysts' expectations of about $1.54 per share.
'Amidst the continuously evolving economic outlook, we are focused on what we can control,' chief executive Scott Thomson said in a statement on Tuesday. 'This quarter we increased our performing allowances to reflect the impact of an uncertain macroeconomic outlook.'
Scotiabank is the second of Canada's six biggest banks to release its second-quarter results, which are often considered a signpost for the country's economy. This is the first time the results will reflect the impact of the tariffs imposed by the United States on an array of Canadian exports since the levies were imposed on March 4 and the earnings cover the three-month period ending April 30.
As a result, analysts are keeping an eye on the amount of money the banks keep aside to tackle loans that may potentially go bad, also known as provisions for credit losses (PCLs), which are a key credit metric for measuring the health of a bank's loan book as well as the ability of households and businesses to pay their debts.
Toronto-Dominion Bank increased its PCLs to $1.3 billion last week when it reported its second-quarter earnings, up from about $1.2 billion in the previous quarter and about $1 billion a year ago.
Scotiabank said on Tuesday that it increased its PCLs to $1.39 billion during the second quarter, up from $1.16 billion in the first quarter and about $1 billion a year ago.
The bank also increased its provision for credit losses on performing loans, or loans that are less likely to go bad, to $346 million, compared to $98 million in the previous quarter and $32 million during the same quarter last year.
Scotiabank said it 'substantially increased' its provision for credit losses on performing loans to reflect the 'impact of a significant deterioration in the macroeconomic outlook indicators in the U.S., Canada and Mexico.'
The increase also reflects the 'continued uncertainty related to U.S. tariffs, mainly impacting the Canadian retail and commercial portfolios,' it said.
The PCLs on impaired loans — loans that are more likely to default — increased by $77 million from a year ago to about $1.05 billion during the second quarter. However, it was lower than the $1.06 billion reported during the first, quarter mainly due to 'lower provisions in international retail in most markets,' the bank said.
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Scotiabank's Canadian banking segment reported adjusted earnings of $613 million, down 31 per cent compared to a year ago, primarily due to the significant increase in performing credit loss allowances and lower margins, the bank said.
Its international banking, global wealth management and global banking segments reported higher numbers compared to last year.
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