[Note: This post is a summary of highlights. To read the complete news release including charts click here.]
Third quarter highlights compared to the same period a year ago:
– Earnings per share (diluted) of $0.98 compared to $0.87
– Net income of $1.06 billion, versus $931 million
– Return on equity of 18.2%, compared to 17.3%
– Productivity ratio of 52.5%, versus 51.0%
– Quarterly dividend at 49 cents per common share
Year-to-date performance versus key 2010 financial and operational objectives was as follows:
1. Earn a return on equity (ROE)(1) of 16 to 20%. For the nine months Scotiabank earned an ROE of 18.5%.
2. Generate growth in earnings per common share (diluted) of 7 to 12%. Our year-over-year growth in earnings per share was 17.3%.
3. Maintain a productivity ratio(1) of less than 58%. Scotiabank’s ratio was 50.9% for the nine months.
4. Maintain strong capital ratios. At 11.7%, Scotiabank’s Tier 1 capital ratio remains strong by both Canadian and international standards.
(1) Refer further below for a discussion of non-GAAP measures.
Scotiabank today reported third quarter income of $1.06 billion compared with $931 million for the same period last year. Year over year, net income was up 14%.
Diluted earnings per share were $0.98, compared to $0.87 in the same period a year ago and $1.02 last quarter. Return on equity remained strong at 18.2%, compared to 17.3% last year and 19.9% last quarter. A dividend of 49 cents per common share was announced.
“All three of our business lines contributed to our success this quarter,” said Rick Waugh, Scotiabank President and CEO. “These strong results were achieved despite the negative impact of $89 million from the year-over-year strengthening of the Canadian dollar. Top-line revenue growth before the impact of foreign currency was 5% year over year.
“We have maintained our strategy of diversification by business and geography and continued our emphasis on prudent risk and capital management while making investments in longer-term growth. This enabled us to continue Scotiabank’s track record of achieving strong quarterly results.
“With net income of $604 million, Canadian Banking had another record quarter with all businesses contributing. Year over year, there was strong asset growth and higher contributions from wealth management. Businesses continued to earn through increased pressure on margins.
“International Banking’s core businesses performed well despite the negative impact of foreign currency translation. Results included contributions from acquisitions made in select strategic markets and a decline in provisions for credit losses. While earnings have been impacted by the lagging economic recovery in some markets, we are now seeing encouraging signs of growth.
“Scotia Capital delivered a solid quarter, notwithstanding a decline in trading revenues, as expected, from the records set in previous quarters. Corporate lending revenues were negatively impacted by lower lending volumes, in part due to slower than expected merger and acquisition activities.
“A notable accomplishment was our high return on equity. As well, we generated substantial internal capital resulting in strong capital ratios, by both Canadian and international standards. This has been achieved despite adverse foreign exchange movements and several acquisitions of financial services companies and asset portfolios. Our existing shareholders have contributed significantly to our capital by reinvesting their dividends.
“The new Basel III proposals will be finalized within the next few months and will result in a tighter and more consistent definition of capital, and higher capital levels internationally. We have completed sensitivity analyses and we are confident the Bank will be able to meet these new requirements. Looking ahead, as the Basel III proposals are implemented, we believe that we will continue to achieve our earnings and productivity targets, while maintaining our investment in people, making acquisitions, meeting our customers’ investment and credit needs, and increasing our dividends to shareholders.
“We remain focused on our core priorities; sustainable revenue growth, capital management, leadership development, prudent risk management and expense control. With the results achieved during the first nine months of the year, we are confident we will meet our established objectives for 2010, and are strongly positioned for the future.”
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. All such statements are made pursuant to the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may include comments with respect to the Bank’s objectives, strategies to achieve those objectives, expected financial results (including those in the area of risk management), and the outlook for the Bank’s businesses and for the Canadian, United States and global economies. Such statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “intent,” “estimate,” “plan,” “may increase,” “may fluctuate,” and similar expressions of future or conditional verbs, such as “will,” “should,” “would” and “could.”
By their very nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not prove to be accurate. Do not unduly rely on forward-looking statements, as a number of important factors, many of which are beyond our control, could cause actual results to differ materially from the estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to: the economic and financial conditions in Canada and globally; fluctuations in interest rates and currency values; liquidity; significant market volatility and interruptions; the failure of third parties to comply with their obligations to us and our affiliates; the effect of changes in monetary policy; legislative and regulatory developments in Canada and elsewhere, including changes in tax laws; the effect of changes to our credit ratings; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions and liquidity regulatory guidance; operational and reputational risks; the risk that the Bank’s risk management models may not take into account all relevant factors; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services in receptive markets; the Bank’s ability to expand existing distribution channels and to develop and realize revenues from new distribution channels; the Bank’s ability to complete and integrate acquisitions and its other growth strategies; changes in accounting policies and methods the Bank uses to report its financial condition and the results of its operations, including uncertainties associated with critical accounting assumptions and estimates; the effect of applying future accounting changes; global capital markets activity; the Bank’s ability to attract and retain key executives; reliance on third parties to provide components of the Bank’s business infrastructure; unexpected changes in consumer spending and saving habits; technological developments; fraud by internal or external parties, including the use of new technologies in unprecedented ways to defraud the Bank or its customers; consolidation in the Canadian financial services sector; competition, both from new entrants and established competitors; judicial and regulatory proceedings; acts of God, such as earthquakes and hurricanes; the possible impact of international conflicts and other developments, including terrorist acts and war on terrorism; the effects of disease or illness on local, national or international economies; disruptions to public infrastructure, including transportation, communication, power and water; 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. For more information, see the discussion starting on page 62 of the Bank’s 2009 Annual Report.
The preceding list of important factors is not exhaustive. 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. 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.
The “Outlook” sections in this document are based on the Bank’s views and the actual outcome is uncertain. Readers should consider the above-noted factors when reviewing these sections.
Additional information relating to the Bank, including the Bank’s Annual Information Form, can be located on the SEDAR website at http://www.sedar.com/ and on the EDGAR section of the SEC’s website at http://www.sec.gov/.
Our Balanced Scorecard
– Return on equity of 16-20%
– Diluted earnings per share growth of 7-12%
– Long-term shareholder value through increases in dividends and stock price appreciation
– High levels of employee satisfaction and engagement
– Diversity of workforce
– High levels of customer satisfaction and loyalty
– Deeper relationship with existing customers
– New customer acquisition
– Productivity ratio of (less than)58%
– Strong practices in corporate governance and compliance processes
– Strong capital ratios
– Corporate social responsibility and strong community involvement
Notable Business Highlights
Serving our customers to help them become better off financially
Our Canadian broker sourced mortgage origination business, Scotia Mortgage Authority’s client services earned them a No. 1 ranking in market share for the six months ended June 2010, as noted in the latest Mortgage Broker Market Share Report by Davis + Henderson.
Positive momentum continued within Scotiabank’s Canadian mutual fund business through the third quarter of fiscal 2010. Scotiabank placed number one among banks for total net sales, resulting in market share gains through the past 12 months.
Scotiabank launched Let the Saving Begin, a new program designed to inspire and empower Canadians to get on track with their saving, investing and borrowing habits.
Scotia Capital, mandated by its clients SNC Lavalin and Innisfree, acted as Lead Underwriter for the $764 million senior secured bond transaction for the construction of the new McGill University Health Centre – one of the largest public-private-partnership bond transactions in Canadian history. Scotia Capital also acted as Mandated Lead Arranger for a $393 million credit facility for the project.
Scotia Capital acted as Joint Lead Bookrunner and Syndication Agent on the Ruby Pipeline LLC US$1.51 billion credit facility, for a natural gas pipeline project financing. Scotia Capital also provided a US$100 million interest rate swap to the project.
Scotiabank’s EcoLiving Program was launched to help Canadian homeowners discover what green renovation options are available and how they can save money by reducing their energy bills and taking full advantage of the available government rebates.
Building our operations
In addition to the ongoing successful integration of R-G Premier Bank of Puerto Rico, Scotiabank announced the completion of its acquisition of The Royal Bank of Scotland’s wholesale banking operations in Colombia, marking Scotiabank’s first foray into this country.
Scotiabank recognized for excellence
Trade Finance Magazine has named Scotiabank Best Trade Bank in Central America and the Caribbean for the second year in a row. The magazine also named Scotiabank the Best International Trade Bank in Peru. The Global Awards represent the opinions of over 13,000 readers, based on the services provided in selected trade sectors and regions.
For the eighth consecutive year, Scotia Capital’s Corporate Derivatives team was ranked No. 1 in Canada by an independent third-party survey firm.
Global Finance Magazine named Scotiabank the Best Consumer Internet Bank in 20 Caribbean markets, including Barbados, Dominican Republic, Jamaica, Puerto Rico, and Trinidad & Tobago. Scotiabank was also named the Best Corporate/Institutional Internet Bank in St. Maarten.
Scotiabank’s annual global employee survey, ViewPoint, revealed that 84% of Scotiabank employees are highly engaged in their work and with the Bank as an employer. This score places the Bank in the top 10 per cent of benchmarked financial services organizations. The Employee Engagement Index, a new measure on this survey, is comprised of a series of questions that include job satisfaction and pride in the Bank, and willingness to refer a friend or family member to Scotiabank Group for employment.