All amounts are in
Canadian dollars and are based on our unaudited Interim Condensed
Consolidated Financial Statements for the quarter ended July 31,
2021 and related notes prepared in accordance with International
Financial Reporting Standards (IFRS), unless otherwise noted. Our
complete Third Quarter 2021 Report to Shareholders, including our
unaudited interim financial statements for the period ended July
31, 2021, can also be found on the SEDAR website at www.sedar.com
and on the EDGAR section of the SEC's website at www.sec.gov.
Supplementary Financial Information is also available, together
with the Third Quarter 2021 Report to Shareholders on the Investor
Relations page of www.scotiabank.com
|
Third Quarter
Highlights on a Reported basis (versus Q3 2020)
|
Third Quarter
Highlights on an Adjusted
basis(1) (versus Q3
2020)
|
•
|
Net income of $2,542
million, compared to $1,304 million
|
•
|
Net income of $2,560
million, compared to $1,308 million
|
•
|
Earnings per share
(diluted) of $1.99, compared to $1.04
|
•
|
Earnings per share
(diluted) of $2.01, compared to $1.04
|
•
|
Return on equity of
15.0%, compared to 8.3%
|
•
|
Return on equity of
15.1%, compared to 8.3%
|
TORONTO, Aug. 24, 2021 /CNW/ - Scotiabank reported third
quarter net income of $2,542 million
compared to $1,304 million in the
same period last year. Diluted earnings per share (EPS) were
$1.99, up 91% from $1.04 in the previous year. Return on equity was
15.0%, up from 8.3% in the previous year.
Adjusted net income(1) increased 96% to
$2,560 million and diluted EPS of
$2.01, increased 93% compared to the
prior year. Return on equity was 15.1% compared to 8.3% a year
ago.
"We delivered another quarter of strong results, with
contributions from all our operating segments, reflecting the
benefits of a well-diversified business model. While the economic
recovery is unfolding at different rates across our footprint, I'm
very proud of the Scotiabank team's on-going resilience and
continued commitment to our customers," said Brian Porter, President and CEO of
Scotiabank.
"During the quarter, the Bank was recognized as the Most
Innovative in Data by The Banker's Global Innovation in
Digital Banking Awards 2021. This award recognizes our commitment
to data and analytics and highlights our ability to identify and
support our most vulnerable customers. We are also proud to
highlight the Bank's recent closing of its inaugural USD
$1 billion 3-year sustainability bond
offering, the largest sustainability bond issued by a Canadian
corporate to date. This offering is yet another example of our
social responsibility initiatives in support of our commitment to
making a positive impact and creating better communities for every
future."
Canadian Banking generated strong earnings of $1,083 million, driven by higher non-interest
income, lower provision for credit losses, as well as strong asset
and deposit growth.
Global Wealth Management's earnings of $397 million were supported by strong revenue
growth, positive operating leverage for the seventh consecutive
quarter, and a 17% growth in AUM and AUA on higher net sales.
Global Banking and Markets reported earnings of $513 million supported by strong performance in
our advisory and capital markets businesses.
International Banking generated earnings of $493 million demonstrating continuing growth
momentum across our key markets.
With a Common Equity Tier 1 capital ratio of 12.2% the Bank
remains well capitalized to support its strategic growth plans.
_____________________
|
(1) Refer
to Non-GAAP Measures section on page 2.
|
Financial Highlights
Reported
Results
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
July
31
|
|
April
30
|
|
July
31
|
|
July
31
|
|
July
31
|
(Unaudited)($
millions)
|
|
2021
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net interest
income
|
$
|
4,217
|
$
|
4,176
|
$
|
4,253
|
$
|
12,744
|
$
|
13,062
|
Non-interest
income
|
|
3,540
|
|
3,560
|
|
3,481
|
|
10,821
|
|
10,769
|
Total
revenue
|
|
7,757
|
|
7,736
|
|
7,734
|
|
23,565
|
|
23,831
|
Provision for credit
losses
|
|
380
|
|
496
|
|
2,181
|
|
1,640
|
|
4,953
|
Non-interest
expenses
|
|
4,097
|
|
4,042
|
|
4,018
|
|
12,347
|
|
12,799
|
Income tax
expense
|
|
738
|
|
742
|
|
231
|
|
2,182
|
|
1,125
|
Net
income
|
$
|
2,542
|
$
|
2,456
|
$
|
1,304
|
$
|
7,396
|
$
|
4,954
|
Net income
attributable to non-controlling interests in
|
|
|
|
|
|
|
|
|
|
|
subsidiaries
|
|
81
|
|
90
|
|
(51)
|
|
261
|
|
3
|
Net income
attributable to equity holders of the Bank
|
$
|
2,461
|
$
|
2,366
|
$
|
1,355
|
$
|
7,135
|
$
|
4,951
|
|
Preferred
shareholders and other equity instrument holders
|
|
35
|
|
77
|
|
23
|
|
155
|
|
114
|
|
Common
shareholders
|
$
|
2,426
|
$
|
2,289
|
$
|
1,332
|
$
|
6,980
|
$
|
4,837
|
Earnings per
common share (in dollars)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
2.00
|
$
|
1.89
|
$
|
1.10
|
$
|
5.75
|
$
|
3.99
|
|
Diluted
|
$
|
1.99
|
$
|
1.88
|
$
|
1.04
|
$
|
5.73
|
$
|
3.88
|
Non-GAAP Measures
The Bank uses a number of financial measures to assess its
performance. Some of these measures are not calculated in
accordance with Generally Accepted Accounting Principles (GAAP),
which are based on International Financial Reporting Standards
(IFRS), are not defined by GAAP and do not have standardized
meanings that would ensure consistency and comparability among
companies using these or similar measures. The Bank believes that
certain non-GAAP measures are useful in assessing ongoing business
performance and provide readers with a better understanding of how
management assesses performance. These non-GAAP measures are used
throughout this press release and are defined in the "Non-GAAP
Measures" section in the Third Quarter 2021 Report to
Shareholders.
Adjusted results and diluted earnings per share
The following table presents reconciliations of GAAP reported
financial results to non-GAAP adjusted financial results. The
adjustments summarized below are consistent with those described in
the Bank's 2020 Annual Report. For a complete description of the
adjustments, refer to the Non-GAAP measures section in the Bank's
2020 Annual Report.
Adjustment impacting current and prior periods:
- Amortization of acquisition-related intangible assets,
excluding software.
Adjustments impacting prior periods only:
- Acquisition and divestiture-related costs – Include costs
related to integrating acquired operations and net (gain)/loss on
divestitures.
- Valuation-related adjustments, recorded in Q1 2020 – Relate to
the inclusion of an additional scenario in the measurement of
allowance for credit losses, a fair value methodology change
relating to uncollateralized OTC derivatives, and a
software-related impairment loss.
Reconciliation of reported and adjusted results
|
|
For the three months
ended
|
For the nine months
ended
|
|
|
July
31
|
|
April 30
|
|
July 31
|
July
31
|
|
July 31
|
(Unaudited)($
millions)
|
2021
|
2021
|
2020
|
2021
|
2020
|
Reported
Results
|
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
$
|
4,217
|
$
|
4,176
|
$
|
4,253
|
$
|
12,744
|
$
|
13,062
|
Non-interest
income
|
|
3,540
|
|
3,560
|
|
3,481
|
|
10,821
|
|
10,769
|
Total
revenue
|
|
7,757
|
|
7,736
|
|
7,734
|
|
23,565
|
|
23,831
|
Provision for credit
losses
|
|
380
|
|
496
|
|
2,181
|
|
1,640
|
|
4,953
|
Non-interest
expenses
|
|
4,097
|
|
4,042
|
|
4,018
|
|
12,347
|
|
12,799
|
Income before
taxes
|
|
3,280
|
|
3,198
|
|
1,535
|
|
9,578
|
|
6,079
|
Income tax
expense
|
|
738
|
|
742
|
|
231
|
|
2,182
|
|
1,125
|
Net
income
|
$
|
2,542
|
$
|
2,456
|
$
|
1,304
|
$
|
7,396
|
$
|
4,954
|
Net income
attributable to non-controlling interests in subsidiaries
(NCI)
|
|
81
|
|
90
|
|
(51)
|
|
261
|
|
3
|
Net income
attributable to equity holders
|
|
2,461
|
|
2,366
|
|
1,355
|
|
7,135
|
|
4,951
|
Net income
attributable to common shareholders
|
$
|
2,426
|
$
|
2,289
|
$
|
1,332
|
$
|
6,980
|
$
|
4,837
|
Diluted earnings
per share (in dollars)
|
$
|
1.99
|
$
|
1.88
|
$
|
1.04
|
$
|
5.73
|
$
|
3.88
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
costs
|
|
|
|
|
|
|
|
|
|
|
Integration
costs(1)
|
$
|
-
|
$
|
-
|
$
|
40
|
$
|
-
|
$
|
157
|
Amortization of
Acquisition-related intangible assets, excluding
software(1)
|
|
24
|
|
26
|
|
26
|
|
78
|
|
80
|
|
|
24
|
|
26
|
|
66
|
|
78
|
|
237
|
Allowance for credit
losses - Additional scenario(2)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
155
|
Derivatives valuation
adjustment(3)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
116
|
Net (gain)/loss on
divestitures(4)
|
|
-
|
|
-
|
|
(44)
|
|
-
|
|
(306)
|
Impairment charge on
software asset(1)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
44
|
Adjustments
(Pre-tax)
|
$
|
24
|
$
|
26
|
$
|
22
|
$
|
78
|
$
|
246
|
Income tax
expense/(benefit)
|
|
(6)
|
|
(7)
|
|
(18)
|
|
(21)
|
|
(177)
|
Adjustments (After
tax)
|
$
|
18
|
$
|
19
|
$
|
4
|
$
|
57
|
$
|
69
|
Adjustment
attributable to NCI
|
|
-
|
|
-
|
|
(5)
|
|
-
|
|
(60)
|
Adjustments (After
tax and NCI)
|
$
|
18
|
$
|
19
|
$
|
(1)
|
$
|
57
|
$
|
9
|
Adjusted
Results
|
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
$
|
4,217
|
$
|
4,176
|
$
|
4,253
|
$
|
12,744
|
$
|
13,062
|
Non-interest
income
|
|
3,540
|
|
3,560
|
|
3,436
|
|
10,821
|
|
10,572
|
Total
revenue
|
|
7,757
|
|
7,736
|
|
7,689
|
|
23,565
|
|
23,634
|
Provision for credit
losses
|
|
380
|
|
496
|
|
2,181
|
|
1,640
|
|
4,798
|
Non-interest
expenses
|
|
4,073
|
|
4,016
|
|
3,951
|
|
12,269
|
|
12,511
|
Income before
taxes
|
|
3,304
|
|
3,224
|
|
1,557
|
|
9,656
|
|
6,325
|
Income tax
expense
|
|
744
|
|
749
|
|
249
|
|
2,203
|
|
1,302
|
Net
income
|
$
|
2,560
|
$
|
2,475
|
$
|
1,308
|
$
|
7,453
|
$
|
5,023
|
Net income
attributable to NCI
|
|
81
|
|
90
|
|
(46)
|
|
261
|
|
63
|
Net income
attributable to equity holders
|
|
2,479
|
|
2,385
|
|
1,354
|
|
7,192
|
|
4,960
|
Net income
attributable to common shareholders
|
$
|
2,444
|
$
|
2,308
|
$
|
1,331
|
$
|
7,037
|
$
|
4,846
|
Adjusted diluted
earnings per share (in dollars)
|
$
|
2.01
|
$
|
1.90
|
$
|
1.04
|
$
|
5.78
|
$
|
3.91
|
(1)
|
Recorded in
non-interest expenses.
|
|
|
|
|
(2)
|
Recorded in
provision for credit losses.
|
|
|
|
|
(3)
|
Recorded in
non-interest income.
|
|
|
|
|
(4)
|
Recorded in
non-interest income; costs related to divestitures are recorded in
non-interest expenses.
|
|
|
|
|
Reconciliation of
reported and adjusted results by business
line(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)($
millions)
|
Canadian
Banking
|
International
Banking
|
Global Wealth
Management
|
Global Banking and
Markets
|
Other
|
Total
|
|
|
For the three
months ended July 31, 2021
|
Reported net
income
|
$
|
1,079
|
$
|
564
|
$
|
392
|
$
|
513
|
$
|
(6)
|
$
|
2,542
|
Total adjustments
(after tax)
|
|
4
|
|
7
|
|
7
|
|
-
|
|
-
|
|
18
|
Adjusted net
income
|
$
|
1,083
|
$
|
571
|
$
|
399
|
$
|
513
|
$
|
(6)
|
$
|
2,560
|
Adjusted net
income attributable to equity holders
|
$
|
1,083
|
$
|
493
|
$
|
397
|
$
|
513
|
$
|
(7)
|
$
|
2,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended April 30, 2021
|
Reported net
income
|
$
|
927
|
$
|
507
|
$
|
374
|
$
|
517
|
$
|
131
|
$
|
2,456
|
Total adjustments
(after tax)
|
|
4
|
|
9
|
|
6
|
|
-
|
|
-
|
|
19
|
Adjusted net
income
|
$
|
931
|
$
|
516
|
$
|
380
|
$
|
517
|
$
|
131
|
$
|
2,475
|
Adjusted net income
attributable to equity holders
|
$
|
931
|
$
|
429
|
$
|
378
|
$
|
517
|
$
|
130
|
$
|
2,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended July 31, 2020
|
Reported net
income
|
$
|
429
|
$
|
(28)
|
$
|
324
|
$
|
600
|
$
|
(21)
|
$
|
1,304
|
Total adjustments
(after tax)
|
|
4
|
|
32
|
|
11
|
|
-
|
|
(43)
|
|
4
|
Adjusted net
income
|
$
|
433
|
$
|
4
|
$
|
335
|
$
|
600
|
$
|
(64)
|
$
|
1,308
|
Adjusted net income
attributable to equity holders
|
$
|
433
|
$
|
53
|
$
|
332
|
$
|
600
|
$
|
(64)
|
$
|
1,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine
months ended July 31, 2021
|
Reported net
income
|
$
|
2,917
|
$
|
1,548
|
$
|
1,187
|
$
|
1,573
|
$
|
171
|
$
|
7,396
|
Total adjustments
(after tax)
|
|
12
|
|
25
|
|
20
|
|
-
|
|
-
|
|
57
|
Adjusted net
income
|
$
|
2,929
|
$
|
1,573
|
$
|
1,207
|
$
|
1,573
|
$
|
171
|
$
|
7,453
|
Adjusted net
income attributable to equity holders
|
$
|
2,929
|
$
|
1,320
|
$
|
1,200
|
$
|
1,573
|
$
|
170
|
$
|
7,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months
ended July 31, 2020
|
Reported net
income
|
$
|
1,758
|
$
|
739
|
$
|
937
|
$
|
1,495
|
$
|
25
|
$
|
4,954
|
Total adjustments
(after tax)
|
|
64
|
|
180
|
|
35
|
|
79
|
|
(289)
|
|
69
|
Adjusted net
income
|
$
|
1,822
|
$
|
919
|
$
|
972
|
$
|
1,574
|
$
|
(264)
|
$
|
5,023
|
Adjusted net income
attributable to equity holders
|
$
|
1,822
|
$
|
865
|
$
|
964
|
$
|
1,574
|
$
|
(265)
|
$
|
4,960
|
(1)
|
Refer to Business
Segment Overview in the Third Quarter 2021 Report to
Shareholders.
|
|
|
Business Segment Review
Canadian Banking
Q3 2021 vs Q3 2020
Net income attributable to equity holders was $1,079 million, compared to $429 million. Adjusted net income was
$1,083 million, an increase of
$650 million or 150%. The increase
was due primarily to lower provision for credit losses and higher
revenues, partly offset by higher non-interest expenses.
Q3 2021 vs Q2 2021
Net income attributable to equity holders increased $152 million or 16%. The increase was due
primarily to higher revenues, and lower provision for credit
losses, partly offset by higher non-interest expenses.
Year-to-date Q3 2021 vs Year-to-date Q3 2020
Net income attributable to equity holders was $2,917 million, an increase of $1,159 million or 66%. Adjusted net income was
$2,929 million, an increase of
$1,107 million or 61%. The increase
was due primarily to lower provision for credit losses and higher
revenues, partly offset by higher non-interest expenses.
International Banking
Q3 2021 vs Q3 2020
Net income attributable to equity holders was $486 million, compared to $26 million. Adjusted net income increased to
$493 million from $53 million. This increase was driven by lower
provision for credit losses and lower non-interest expenses,
partially offset by lower revenues, higher income taxes, and the
negative impact of foreign currency translation.
Q3 2021 vs Q2 2021
Net income attributable to equity holders increased $66 million or 16%. Adjusted net income
attributable to equity holders increased by $64 million or 15%. This was due largely to lower
provision for credit losses and income taxes, partially offset by
lower revenues.
Year-to-date Q3 2021 vs Year-to-date Q3 2020
Net income attributable to equity holders was $1,295 million, an increase of $578 million. Adjusted net income attributable to
equity holders was $1,320 million, an
increase of $455 million. This
increase was due largely to lower provision for credit losses and
non-interest expenses, partially offset by lower revenues, higher
income taxes, and the negative impact of foreign currency
translation.
Financial Performance on an Adjusted and Constant Dollar
Basis
The discussion below on the results of operations is on an
adjusted and constant dollar basis. Constant dollar basis excludes
the impact of foreign currency translation, which is a non-GAAP
financial measure (refer to "Non-GAAP" measures section in the
Third Quarter 2021 Report to Shareholders). The Bank believes that
reporting in constant dollar is useful for readers in assessing
ongoing business performance.
Q3 2021 vs Q3 2020
Net income attributable to equity holders was $486 million, an increase of $477 million. Adjusted net income increased to
$493 million from $33 million. This increase was driven by lower
provision for credit losses, partially offset by higher income
taxes.
Q3 2021 vs Q2 2021
Net income attributable to equity holders increased $72 million or 17%. Adjusted net income
attributable to equity holders increased by $71 million or 17%. This was due largely to lower
provision for credit losses, higher non-interest income, and lower
income taxes, partially offset by higher non-interest expenses.
Year-to-date Q3 2021 vs Year-to-date Q3 2020
Net income attributable to equity holders was $1,295 million, an increase of $679 million. Adjusted net income attributable to
equity holders was $1,320 million, up
$563 million. This increase was due
largely to lower provision for credit losses and non-interest
expenses, partially offset by lower revenues and higher income
taxes.
Global Wealth Management
Q3 2021 vs Q3 2020
Net income attributable to equity holders was $390 million, an increase of $69 million or 21%. Adjusted net income increased
to $397 million, up $65 million or 19%, due primarily to higher
mutual fund fees and brokerage revenues, partially offset by higher
volume-related expenses.
Q3 2021 vs Q2 2021
Net income attributable to equity holders increased $18 million or 5%. Adjusted net income increased
$19 million or 5%, due primarily to
higher fee income from strong net sales and market appreciation,
partially offset by volume driven expense growth.
Year-to-date Q3 2021 vs Year-to-date Q3 2020
Net income attributable to equity holders was $1,180 million, an increase of $251 million or 27%. Adjusted net income
increased to $1,200 million, up 24%,
due primarily to higher mutual fund fees, brokerage revenues, and
elevated performance fees, partially offset by higher volume
related expenses.
Global Banking and Markets
Q3 2021 vs Q3 2020
Net income attributable to equity holders was $513 million, a decrease of $87 million or 14%, due to lower net interest
income and non-interest income and the negative impact of foreign
currency translation, partially offset by lower provision for
credit losses.
Q3 2021 vs Q2 2021
Net income attributable to equity holders decreased by
$4 million or 1%, due mainly to lower
non-interest income, higher provision for credit losses and the
negative impact of foreign currency translation, partially offset
by higher net interest income and lower non-interest expenses.
Year-to-date Q3 2021 vs Year-to-date Q3 2020
Net income attributable to equity holders was $1,573 million, an increase of $78 million or 5%. Adjusted net income
attributable to equity holders decreased by $1 million, due to lower non-interest income and
net interest income, offset by lower provision for credit losses
and lower non-interest expenses.
Other
Q3 2021 vs Q3 2020
Net income attributable to equity holders was a net loss of
$7 million compared to a net loss of
$21 million in the prior year.
Adjusted net income attributable to equity holders was up
$57 million due mainly to higher
contribution from asset/liability management activities and lower
COVID-19 related costs, partially offset by lower investment
gains.
Q3 2021 vs Q2 2021
Net income attributable to equity holders decreased $137 million from the prior quarter. The decrease
was due primarily to lower investment gains, and income from
associated corporations.
Year-to-date Q3 2021 vs Year-to-date Q3 2020
Net income attributable to equity holders was $170 million compared to $52 million in the prior year. Adjusted net
income attributable to equity holders was up $435 million due mainly to higher contribution
from asset/liability management activities and lower non-interest
expenses, which included metals business charges of $221 million and higher COVID-19 related costs in
the prior year, partially offset by the investment in the SCENE
loyalty program in the current year.
Credit risk
Provision for credit losses
Q3 2021 vs Q3 2020
The provision for credit losses was $380
million compared to $2,181
million, a decrease of $1,801
million or 83%. The provision for credit losses ratio
decreased 112 basis points to 24 basis points.
Provision on performing loans was a net reversal of $461 million compared to $1,253 million, a decrease of $1,714 million. Of this decrease, $1,299 million is related to retail due primarily
to the more favourable macroeconomic outlook across the footprint
and credit migration to impaired, mainly in International Banking.
Commercial and corporate banking provisions decreased $415 million driven primarily by the improving
macroeconomic outlook.
Provision on impaired loans was $841
million compared to $928
million, a decrease of $87
million or 9% driven by lower commercial and corporate
provisions, partially offset by higher retail provisions in
International Banking driven by credit migration. The provision for
credit losses ratio on impaired loans decreased five basis points
to 53 basis points.
Q3 2021 vs Q2 2021
The provision for credit losses was $380
million compared to $496
million, a decrease of $116
million. The provision for credit losses ratio decreased
nine basis points to 24 basis points.
Provision on performing loans was a net reversal of $461 million compared to net reversal of
$696 million last quarter.
Approximately $180 million of the
provision reversals this quarter was due to reduction of allowances
built in prior periods reflecting the improvement in credit quality
and more favourable macroeconomic outlook. The remaining reversal
was due to credit migration, the majority of which was to impaired
loans in the retail portfolio, mainly in International Banking.
Provision on impaired loans was $841
million, a decrease of $351
million or 29% due primarily to lower retail provisions
driven by lower formations. The provision for credit losses ratio
on impaired loans was 53 basis points, a decrease of 27 basis
points.
Year-to-date Q3 2021 vs Year-to-date Q3 2020
The provision for credit losses was $1,640 million compared to $4,953 million, a decrease of $3,313 million. Adjusted provision for credit
losses decreased $3,158 million or
66%. The provision for credit losses ratio decreased 71 basis
points to 35 basis points and the adjusted provision for credit
losses ratio decreased by 68 basis points.
Provision on performing loans was a net reversal of $1,155 million compared to $2,320 million, a decrease of $3,475 million. The adjusted provision for
performing loans decreased $3,353
million of which $2,566
million related to retail driven by the more favourable
macroeconomic outlook and credit migration. Commercial and
corporate banking provisions decreased $787
million driven primarily by improving macroeconomic outlook.
Approximately $380 million
(July 31, 2020 – nil) of the
provision reversals was due to release of allowances built in prior
periods.
The provision for credit losses on impaired loans was
$2,795 million, an increase of
$162 million. Adjusted provision for
credit losses on impaired loans increased $195 million or 8% due to higher retail
provisions in International Banking driven by credit migration,
partially offset by lower provisions in Canadian Banking
portfolios. The provision for credit losses ratio on impaired loans
increased four basis points to 60 basis points and also increased
four basis points on an adjusted basis.
Allowance for credit losses
The total allowance for credit losses as at July 31, 2021 was $6,232
million. The allowance for credit losses on loans was
$6,079 million, down $637 million from the prior quarter. The decrease
was due primarily to lower performing loan provisions driven by
credit migration and write-offs related to the International
Banking retail portfolio, and reversals due to the more favourable
macroeconomic outlook.
The allowance against performing loans was lower at $4,320 million compared to $4,778 million last quarter. The decrease was due
primarily to credit migration and write-offs related to the
International Banking retail portfolio, and reversals due to the
more favourable macroeconomic outlook.
The allowance on impaired loans decreased to $1,759 million from $1,938
million last quarter. The decrease is related to the
International Banking retail portfolio as write-offs more than
offset current provisions.
Impaired loans
Gross impaired loans decreased to $4,735
million as at July 31, 2021,
from $5,116 million last quarter. The
decrease was due primarily to lower formations across portfolios
and higher write-offs related to the International Banking retail
portfolio. The gross impaired loan ratio was 73 basis points as at
July 31, 2021, a decrease of eight
basis points.
Net impaired loans in Canadian Banking were $459 million as at July
31, 2021, a decrease of $79
million from April 30, 2021.
International Banking's net impaired loans were $2,301 million as at July
31, 2021, a decrease of $74
million from last quarter. In Global Banking and Markets,
net impaired loans were $196 million
as at July 31, 2021, a decrease of
$47 million from the prior quarter.
In Global Wealth Management, net impaired loans were $20 million as at July 31,
2021, a decrease of $2 million
quarter over quarter. Net impaired loans as a percentage of loans
and acceptances were 0.46% as at July 31,
2021, a decrease of four basis points from 0.50% from last
quarter.
Capital Ratios
The Bank's Common Equity Tier 1 (CET1) capital ratio was 12.2%
at July 31, 2021, a decrease of 10
basis points from the prior quarter, due primarily to increases in
risk-weighted assets primarily in retail mortgages, personal and
business lending, OSFI's reversal of its temporary reduction in the
SVaR multiplier, and a lower CET1 inclusion from declines in Stage
1 and Stage 2 expected credit losses (ECL), partly offset by strong
internal capital generation. As at July 31,
2021, the Bank's CET1 ratio included a benefit of nine basis
points (April 30, 2021 – 14 basis
points; October 31, 2020 – 30 basis
points) from OSFI's transitional adjustment for the partial
inclusion of increases in Stage 1 and Stage 2 ECL relative to their
pre-crisis baseline levels.
The Bank's Tier 1 capital ratio was 13.7% as at July 31, 2021, an increase of approximately 10
basis points from the prior quarter, due primarily to the Bank's
issuance of $1.25 billion of Tier 1
qualifying Limited Recourse Capital Notes (LRCNs), partly offset by
the above noted impacts to the CET1 capital ratio and the
redemption of $500 million of Basel
III compliant NVCC preferred shares. The Bank's Total capital ratio
of 15.7% was unchanged from the prior quarter.
The Leverage ratio was 4.8% as at July
31, 2021, an increase of approximately 10 basis points from
the prior quarter, as higher Tier 1 capital was partly offset by
growth in the Bank's on and off-balance sheet assets.
As at July 31, 2021, the CET1,
Tier 1, Total capital and Leverage ratios were well above OSFI's
minimum capital ratios.
Forward-looking statements
From time to time, our public communications often include oral
or written forward-looking statements. Statements of this type are
included in this document, and may be included in other filings
with Canadian securities regulators or the U.S. Securities and
Exchange Commission, or in other communications. In addition,
representatives of the Bank may include forward-looking statements
orally to analysts, investors, the media and others. All such
statements are made pursuant to the "safe harbor" provisions of the
U.S. Private Securities Litigation Reform Act of 1995 and any
applicable Canadian securities legislation. Forward-looking
statements may include, but are not limited to, statements made in
this document, the Management's Discussion and Analysis in the
Bank's 2020 Annual Report under the headings "Outlook" and in other
statements regarding the Bank's objectives, strategies to achieve
those objectives, the regulatory environment in which the Bank
operates, anticipated financial results, and the outlook for the
Bank's businesses and for the Canadian, U.S. and global economies.
Such statements are typically identified by words or phrases such
as "believe," "expect," "foresee," "forecast," "anticipate,"
"intend," "estimate," "plan," "goal," "project," and similar
expressions of future or conditional verbs, such as "will," "may,"
"should," "would" and "could."
By their very nature, forward-looking statements require us to
make assumptions and are subject to inherent risks and
uncertainties, which give rise to the possibility that our
predictions, forecasts, projections, expectations or conclusions
will not prove to be accurate, that our assumptions may not be
correct and that our financial performance objectives, vision and
strategic goals will not be achieved.
We caution readers not to place undue reliance on these
statements as a number of risk factors, many of which are beyond
our control and effects of which can be difficult to predict, could
cause our actual results to differ materially from the
expectations, targets, estimates or intentions expressed in such
forward-looking statements.
The future outcomes that relate to forward-looking statements
may be influenced by many factors, including but not limited to:
general economic and market conditions in the countries in which we
operate; changes in currency and interest rates; increased funding
costs and market volatility due to market illiquidity and
competition for funding; the failure of third parties to comply
with their obligations to the Bank and its affiliates; changes in
monetary, fiscal, or economic policy and tax legislation and
interpretation; changes in laws and regulations or in supervisory
expectations or requirements, including capital, interest rate and
liquidity requirements and guidance, and the effect of such changes
on funding costs; changes to our credit ratings; operational and
infrastructure risks; reputational risks; the accuracy and
completeness of information the Bank receives on customers and
counterparties; the timely development and introduction of new
products and services; our ability to execute our strategic plans,
including the successful completion of acquisitions and
dispositions, including obtaining regulatory approvals; critical
accounting estimates and the effect of changes to accounting
standards, rules and interpretations on these estimates; global
capital markets activity; the Bank's ability to attract, develop
and retain key executives; the evolution of various types of fraud
or other criminal behaviour to which the Bank is exposed;
disruptions in or attacks (including cyber-attacks) on the Bank's
information technology, internet, network access, or other voice or
data communications systems or services; increased competition in
the geographic and in business areas in which we operate, including
through internet and mobile banking and non-traditional
competitors; exposure related to significant litigation and
regulatory matters; the occurrence of natural and unnatural
catastrophic events and claims resulting from such events; the
emergence of widespread health emergencies or pandemics, including
the magnitude and duration of the COVID-19 pandemic and its impact
on the global economy and financial market conditions and the
Bank's business, results of operations, financial condition and
prospects; and the Bank's anticipation of and success in managing
the risks implied by the foregoing. A substantial amount of the
Bank's business involves making loans or otherwise committing
resources to specific companies, industries or countries.
Unforeseen events affecting such borrowers, industries or countries
could have a material adverse effect on the Bank's financial
results, businesses, financial condition or liquidity. These and
other factors may cause the Bank's actual performance to differ
materially from that contemplated by forward-looking statements.
The Bank cautions that the preceding list is not exhaustive of all
possible risk factors and other factors could also adversely affect
the Bank's results, for more information, please see the "Risk
Management" section of the Bank's 2020 Annual Report, as may be
updated by quarterly reports.
Material economic assumptions underlying the forward-looking
statements contained in this document are set out in the 2020
Annual Report under the headings "Outlook", as updated by quarterly
reports. The "Outlook" sections are based on the Bank's views and
the actual outcome is uncertain. Readers should consider the
above-noted factors when reviewing these sections. When relying on
forward-looking statements to make decisions with respect to the
Bank and its securities, investors and others should carefully
consider the preceding factors, other uncertainties and potential
events. Any forward-looking statements contained in this document
represent the views of management only as of the date hereof and
are presented for the purpose of assisting the Bank's shareholders
and analysts in understanding the Bank's financial position,
objectives and priorities, and anticipated financial performance as
at and for the periods ended on the dates presented, and may not be
appropriate for other purposes. Except as required by law, the Bank
does not undertake to update any forward-looking statements,
whether written or oral, that may be made from time to time by or
on its behalf.
Additional information relating to the Bank, including the
Bank's Annual Information Form, can be located on the SEDAR website
at www.sedar.com and on the EDGAR section of the SEC's website at
www.sec.gov.
Shareholders Information
Dividend and Share Purchase Plan
Scotiabank's dividend reinvestment and share purchase plan
allows common and preferred shareholders to purchase additional
common shares by reinvesting their cash dividend without incurring
brokerage or administrative fees. As well, eligible shareholders
may invest up to $20,000 each fiscal
year to purchase additional common shares of the Bank. All
administrative costs of the plan are paid by the Bank. For more
information on participation in the plan, please contact the
transfer agent.
Website
For information relating to Scotiabank and its services, visit
us at our website: www.scotiabank.com.
Conference Call and Web Broadcast
The quarterly results conference call will take place on
August 24, 2021, at 7:15 am EDT and is expected to last approximately
one hour. Interested parties are invited to access the call live,
in listen-only mode, by telephone at 416-641-6104 or toll-free, at
1-800-952-5114 using ID 7804527# (please call shortly before
7:15 am EDT). In addition, an audio
webcast, with accompanying slide presentation, may be accessed via
the Investor Relations page of www.scotiabank.com.
Following discussion of the results by Scotiabank executives,
there will be a question and answer session. A telephone replay of
the conference call will be available from August 24, 2021, to September 23, 2021, by calling 905-694-9451 or
1-800-408-3053 (North America
toll-free) and entering the access code 6256334#. The archived
audio webcast will be available on the Bank's website for three
months.
Additional Information
Investors:
Financial Analysts, Portfolio Managers and other Institutional
Investors requiring financial information, please contact Investor
Relations, Finance Department:
Scotiabank
Scotia Plaza, 44 King Street West
Toronto, Ontario, Canada M5H
1H1
Telephone: (416) 775-0798
E-mail: investor.relations@scotiabank.com
Global Communications:
Scotiabank
44 King Street West, Toronto, Ontario
Canada M5H 1H1
E-mail: corporate.communications@scotiabank.com
Shareholders:
For enquiries related to changes in share registration or
address, dividend information, lost share certificates, estate
transfers, or to advise of duplicate mailings, please contact the
Bank's transfer agent:
Computershare Trust Company of Canada
100 University Avenue, 8th Floor
Toronto, Ontario, Canada M5J
2Y1
Telephone: 1-877-982-8767
Fax: 1-888-453-0330
E-mail: service@computershare.com
Co-Transfer Agent (U.S.A.)
Computershare Trust Company, N.A.
Att: Stock Transfer Department
Overnight Mail Delivery: 462 South 4th Street, Louisville, KY 40202
Regular Mail Delivery: P.O. Box 505005, Louisville, KY 40233-5005
Telephone: 1-800-835-8778
For other shareholder enquiries, please contact the Corporate
Secretary's Department:
Scotiabank
Scotia Plaza, 44 King Street West
Toronto, Ontario, Canada M5H
1H1
Telephone: (416) 866-3672
E-mail: corporate.secretary@scotiabank.com
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SOURCE Scotiabank