All amounts are in Canadian dollars and are based on our unaudited Interim Condensed Consolidated Financial Statements for the quarter ended |
Second Quarter Highlights on a Reported basis (versus Q2, 2019) | Second Quarter Highlights on an Adjusted basis(1) (versus Q2, 2019) | ||
• | Net income of | • | Net income of |
• | Earnings per share (diluted) of | • | Earnings per share (diluted) of |
• | Return on equity of 7.9%, compared to 13.8% | • | Return on equity of 8.2%, compared to 13.6% |
"While the Bank's second quarter results were significantly impacted by the COVID-19 pandemic, we have remained fully operational and prioritized the health and safety of our employees. The Bank has a long history of standing by our customers in challenging times, and our dedicated teams have ensured we have provided financial relief to millions of our customers across our footprint. The Bank remains well positioned from a capital and liquidity perspective, and we are appropriately reserved for potential credit losses. Our repositioning efforts and significant investments in technology over the last number of years have allowed us to support our customers during this difficult time. We launched several new digital banking solutions this quarter which enabled the Bank to provide financial relief to approximately 300,000 Canadian households and processed over 2 million customer assistance applications for customers across the International Banking footprint. We were also proud to support our communities across our footprint having committed over On behalf of Scotiabank's leadership team, I would like to extend my sincere thanks to all of our employees for providing customers with the critical banking services they need. Thank you for your flexibility and adaptability and quickly adjusting to new work environments and work loads, continuing to put our customers first, and for supporting one another and our communities. We are proud to see everyone coming together across teams and businesses to make it work – and I have no doubt this cooperation will continue for as long as this challenging time continues," said |
Adjusted net income(1) was
Canadian Banking reported adjusted earnings of
International Banking delivered adjusted earnings of
____________________________________________ |
(1) Refer to Non-GAAP Measures section on page 3. |
(2) Refer to page 51 of the Second Quarter 2020 Report to Shareholders. |
Global Wealth Management reported adjusted earnings of
Global Banking and Markets reported earnings of
The Bank reported a Common Equity Tier 1 capital ratio of 10.9% and a liquidity coverage ratio of 132%. Our strong levels of capital and liquidity continue to protect the Bank in times of uncertainty.
Financial Results
Reported Results | For the three months ended | For the six months ended | |||||||||
(Unaudited)($ millions) | 2020 | 2020 | 2019 | 2020 | 2019 | ||||||
Net interest income | $ | 4,417 | $ | 4,392 | $ | 4,193 | $ | 8,809 | $ | 8,467 | |
Non-interest income | 3,539 | 3,749 | 3,610 | 7,288 | 6,940 | ||||||
Total revenue | 7,956 | 8,141 | 7,803 | 16,097 | 15,407 | ||||||
Provision for credit losses | 1,846 | 926 | 873 | 2,772 | 1,561 | ||||||
Non-interest expenses | 4,363 | 4,418 | 4,046 | 8,781 | 8,217 | ||||||
Income tax expense | 423 | 471 | 625 | 894 | 1,123 | ||||||
Net income | $ | 1,324 | $ | 2,326 | $ | 2,259 | $ | 3,650 | $ | 4,506 | |
Net income attributable to non-controlling interests in | |||||||||||
subsidiaries | 15 | 39 | 70 | 54 | 181 | ||||||
Net income attributable to equity holders of the Bank | $ | 1,309 | $ | 2,287 | $ | 2,189 | $ | 3,596 | $ | 4,325 | |
Preferred shareholders and other equity instrument | |||||||||||
holders | 66 | 25 | 64 | 91 | 93 | ||||||
Common shareholders | $ | 1,243 | $ | 2,262 | $ | 2,125 | $ | 3,505 | $ | 4,232 | |
Earnings per common share (in dollars) | |||||||||||
Basic | $ | 1.03 | $ | 1.86 | $ | 1.74 | $ | 2.89 | $ | 3.46 | |
Diluted | $ | 1.00 | $ | 1.84 | $ | 1.73 | $ | 2.84 | $ | 3.44 |
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 Second Quarter 2020 Report to Shareholders.
Adjusted results and diluted earnings per share
The following tables present reconciliations of GAAP Reported financial results to non-GAAP Adjusted financial results. The financial results have been adjusted for the following:
1) Acquisition and divestiture-related amounts – Acquisition and divestiture-related amounts are defined as:
A) Acquisition-related costs
- Integration costs – Includes costs that are incurred and relate to integrating the acquired operations and are recorded in the Global Wealth Management and International Banking operating segments. These costs will cease once integration is complete. The costs relate to the following acquisitions:
- Banco Cencosud,
Peru (closed Q2, 2019) Banco Dominicano del Progreso ,Dominican Republic (closed Q2, 2019)MD Financial Management ,Canada (closed Q4, 2018)- Jarislowsky,
Fraser Limited ,Canada (closed Q3, 2018) - Citibank consumer and small and medium enterprise operations,
Colombia (closed Q3, 2018) - BBVA,
Chile (closed Q3, 2018) - Amortization of Acquisition-related intangible assets, excluding software. These costs relate to the six acquisitions above, as well as prior acquisitions and are recorded in the Canadian Banking, Global Wealth Management and International Banking operating segments.
B) Net (gain)/loss on divestitures – The Bank announced a number of divestitures in 2019 in accordance with its strategy to reposition the Bank. The (gain)/loss on the divestitures is recorded in the Other segment, and relates to the following divestitures:
- Equity-accounted investment in
Thanachart Bank ,Thailand (closed Q1, 2020) - Colfondos AFP,
Colombia (closed Q1, 2020) - Operations in
Puerto Rico and USVI (closed Q1, 2020) - Insurance and banking operations in
El Salvador (closed Q1, 2020) - Insurance and pension operations in
Dominican Republic (closed Q2, 2019)
2) Allowance for credit losses (ACL) – Additional Scenario – The Bank modified its ACL measurement methodology in Q1, 2020 by adding an additional, more severe pessimistic scenario, consistent with developing practice among major international banks in applying IFRS 9, and the Bank's prudent approach to expected credit loss provisioning. The modification resulted in an increase in provision for credit losses of
3) Derivative Valuation Adjustment – The Bank enhanced its fair value methodology primarily relating to uncollateralized OTC derivatives which resulted in a pre-tax charge of
4) Impairment charge on software asset – The Bank recorded an impairment loss in the Other operating segment of
Reconciliation of reported and adjusted results and diluted earnings per share
For the three months ended | For the six months ended | ||||||||||
($ millions) |
|
|
|
| 2019 | ||||||
Reported Results | |||||||||||
Net interest income | $ | 4,417 | $ | 4,392 | $ | 4,193 | $ | 8,809 | $ | 8,467 | |
Non-interest income | 3,539 | 3,749 | 3,610 | 7,288 | 6,940 | ||||||
Total Revenue | 7,956 | 8,141 | 7,803 | 16,097 | 15,407 | ||||||
Provision for credit losses | 1,846 | 926 | 873 | 2,772 | 1,561 | ||||||
Non-interest expenses | 4,363 | 4,418 | 4,046 | 8,781 | 8,217 | ||||||
Income before taxes | 1,747 | 2,797 | 2,884 | 4,544 | 5,629 | ||||||
Income tax expense | 423 | 471 | 625 | 894 | 1,123 | ||||||
Net income | $ | 1,324 | $ | 2,326 | $ | 2,259 | $ | 3,650 | $ | 4,506 | |
Net income attributable to non-controlling interests in subsidiaries (NCI) | 15 | 39 | 70 | 54 | 181 | ||||||
Net income attributable to equity holders | $ | 1,309 | $ | 2,287 | $ | 2,189 | $ | 3,596 | $ | 4,325 | |
Net income attributable to common shareholders | $ | 1,243 | $ | 2,262 | $ | 2,125 | $ | 3,505 | $ | 4,232 | |
Diluted earnings per share (in dollars) | $ | 1.00 | $ | 1.84 | $ | 1.73 | $ | 2.84 | $ | 3.44 | |
Adjustments | |||||||||||
Acquisition-related amounts | |||||||||||
Day 1 provision for credit losses on acquired performing | |||||||||||
financial instruments(1) | $ | - | $ | - | $ | 151 | $ | - | $ | 151 | |
Integration costs(2) | 41 | 76 | 25 | 117 | 56 | ||||||
Amortization of Acquisition-related intangible assets, excluding | |||||||||||
software(2) | 27 | 27 | 28 | 54 | 58 | ||||||
Acquisition-related costs | 68 | 103 | 204 | 171 | 265 | ||||||
Allowance for credit losses - Additional scenario(1) | - | 155 | - | 155 | - | ||||||
Derivatives valuation adjustment(3) | - | 116 | - | 116 | - | ||||||
Net (gain)/loss on divestitures(4) | - | (262) | (173) | (262) | (173) | ||||||
Impairment charge on software asset(2) | - | 44 | - | 44 | - | ||||||
Adjustments (Pre-tax) | 68 | 156 | 31 | 224 | 92 | ||||||
Income tax expense/(benefit) | (21) | (138) | (27) | (159) | (44) | ||||||
Adjustments (After tax) | 47 | 18 | 4 | 65 | 48 | ||||||
Adjustment attributable to NCI | (7) | (48) | (45) | (55) | (50) | ||||||
Adjustments (After tax and NCI) | $ | 40 | $ | (30) | $ | (41) | $ | 10 | $ | (2) | |
Adjusted Results | |||||||||||
Net interest income | $ | 4,417 | $ | 4,392 | $ | 4,193 | $ | 8,809 | $ | 8,467 | |
Non-interest income | 3,539 | 3,597 | 3,437 | 7,136 | 6,767 | ||||||
Total revenue | 7,956 | 7,989 | 7,630 | 15,945 | 15,234 | ||||||
Provision for credit losses | 1,846 | 771 | 722 | 2,617 | 1,410 | ||||||
Non-interest expenses | 4,295 | 4,265 | 3,993 | 8,560 | 8,103 | ||||||
Income before taxes | 1,815 | 2,953 | 2,915 | 4,768 | 5,721 | ||||||
Income tax expense | 444 | 609 | 652 | 1,053 | 1,167 | ||||||
Net income | $ | 1,371 | $ | 2,344 | $ | 2,263 | $ | 3,715 | $ | 4,554 | |
Net income attributable to NCI | 22 | 87 | 115 | 109 | 231 | ||||||
Net income attributable to equity holders | $ | 1,349 | $ | 2,257 | $ | 2,148 | $ | 3,606 | $ | 4,323 | |
Net income attributable to common shareholders | $ | 1,283 | $ | 2,232 | $ | 2,084 | $ | 3,515 | $ | 4,230 | |
Adjusted diluted earnings per share (in dollars) | $ | 1.04 | $ | 1.83 | $ | 1.70 | $ | 2.87 | $ | 3.44 | |
Impact of adjustments on diluted earnings per share (in dollars) | $ | 0.04 | $ | (0.01) | $ | (0.03) | $ | 0.03 | $ | - |
(1) | Recorded in provision for credit losses. | ||||||||||
(2) | Recorded in non-interest expenses. | ||||||||||
(3) | Recorded in non-interest income. | ||||||||||
(4) | (Gain)/loss on divestitures is 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)
($ millions) | Canadian | International | Global Wealth | Global Banking | Other | Total | |||||||
For the three months ended | |||||||||||||
Reported net income | $ | 477 | $ | 185 | $ | 304 | $ | 523 | $ | (165) | $ | 1,324 | |
Total adjustments (after tax) | 4 | 31 | 12 | - | - | 47 | |||||||
Adjusted net income | $ | 481 | $ | 216 | $ | 316 | $ | 523 | $ | (165) | $ | 1,371 | |
For the three months ended | |||||||||||||
Reported net income | $ | 852 | $ | 582 | $ | 309 | $ | 372 | $ | 211 | $ | 2,326 | |
Total adjustments (after tax) | 56 | 117 | 12 | 79 | (246) | 18 | |||||||
Adjusted net income | $ | 908 | $ | 699 | $ | 321 | $ | 451 | $ | (35) | $ | 2,344 | |
For the three months ended | |||||||||||||
Reported net income | $ | 819 | $ | 701 | $ | 298 | $ | 420 | $ | 21 | $ | 2,259 | |
Total adjustments (after tax) | 4 | 130 | 11 | - | (141) | 4 | |||||||
Adjusted net income | $ | 823 | $ | 831 | $ | 309 | $ | 420 | $ | (120) | $ | 2,263 | |
For the six months ended | |||||||||||||
Reported net income | $ | 1,329 | $ | 767 | $ | 613 | $ | 895 | $ | 46 | $ | 3,650 | |
Total adjustments (after tax) | 60 | 148 | 24 | 79 | (246) | 65 | |||||||
Adjusted net income | $ | 1,389 | $ | 915 | $ | 637 | $ | 974 | $ | (200) | $ | 3,715 | |
For the six months ended | |||||||||||||
Reported net income | $ | 1,680 | $ | 1,529 | $ | 575 | $ | 755 | $ | (33) | $ | 4,506 | |
Total adjustments (after tax) | 8 | 157 | 24 | - | (141) | 48 | |||||||
Adjusted net income | $ | 1,688 | $ | 1,686 | $ | 599 | $ | 755 | $ | (174) | $ | 4,554 |
(1) | Refer to Business Segment Review in the Second Quarter 2020 Report to Shareholders. |
Business Segment Review
Reorganization of Business Segments
Effective
The Bank will now publish financial information across five business segments including:
- Canadian Banking (excluding Canadian Wealth Management)
- International Banking (excluding International Wealth Management)
- Global Wealth Management (including Canadian Wealth Management and International Wealth Management)
- Global Banking and Markets; and
- Other
Canadian Banking
Q2 2020 vs Q2 2019
Net income attributable to equity holders was
Q2 2020 vs Q1 2020
Net income attributable to equity holders declined
Year-to-date Q2 2020 vs Year-to-date Q2 2019
Net income attributable to equity holders was
International Banking
Financial Performance on a Reported Basis
Q2 2020 vs Q2 2019
Net income attributable to equity holders was
Q2 2020 vs Q1 2020
Net income attributable to equity holders decreased by
Year-to-date Q2 2020 vs Year-to-date Q2 2019
Net income attributable to equity holders decreased by
Financial Performance on a Constant Dollar Basis
The discussion below on the results of operations is on a constant dollar basis that excludes the impact of foreign currency translation, which is a non-GAAP financial measure (refer to "non-GAAP" measures section in the Second Quarter 2020 Report to Shareholders).The Bank believes that reporting in constant dollar is useful for readers in assessing ongoing business performance.
Q2 2020 vs Q2 2019
Net income attributable to equity holders was
Q2 2020 vs Q1 2020
Net income attributable to equity holders decreased by
Year-to-date Q2 2020 vs Year-to-date Q2 2019
Net income attributable to equity holders decreased by
Global Wealth Management
Q2 2020 vs Q2 2019
Net income attributable to equity holders was
Q2 2020 vs Q1 2020
Net income attributable to equity holders declined
Year-to-date Q2 2020 vs Year-to-date Q2 2019
Net income attributable to equity holders was
Global Banking and Markets
Q2 2020 vs Q2 2019
Net income attributable to equity holders was
Q2 2020 vs Q1 2020
Net income attributable to equity holders increased by
Year-to-date Q2 2020 vs Year-to-date Q2 2019
Net income attributable to equity holders was
Other
Q2 2020 vs Q2 2019
Net loss attributable to equity holders was
Q2 2020 vs Q1 2020
Net loss attributable to equity holders was
Year-to-date Q2 2020 vs Year-to-date Q2 2019
Net income attributable to equity holders was
Credit risk
Provision for credit losses
Q2 2020 vs Q2 2019
The provision for credit losses was
Provision on impaired loans was
Provision on performing financial instruments was
Q2 2020 vs Q1 2020
The provision for credit losses was
Provision on impaired loans was
Provision on performing financial instruments was
Year-to-date Q2 2020 vs Year-to-date Q2 2019
The provision for credit losses was
The provision for credit losses on impaired loans was
Provision on performing loans was
Allowance for credit losses
The total allowance for credit losses as at
The allowance on impaired loans increased to
Impaired loans
Gross impaired loans increased to
Net impaired loans in Canadian Banking were
Capital Ratios
The Bank's Common Equity Tier 1 (CET1) capital ratio was 10.9% at
The Bank's Tier 1 and Total capital ratios were 11.9% and 14.0%, respectively, a decrease of approximately 60 basis points from the prior quarter, due primarily to the above noted impacts to the CET1 ratio.
The Bank's Leverage ratio was 4.4% at
As at
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
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 2019 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 2019 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
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
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
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
Contact information
Investors:
Financial Analysts, Portfolio Managers and other
Scotiabank
Telephone: (416) 775-0798
E-mail: investor.relations@scotiabank.com
Scotiabank
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:
Telephone: 1-877-982-8767
Fax: 1-888-453-0330
E-mail: service@computershare.com
Co-Transfer Agent (
Telephone: 1-800-962-4284
For other shareholder enquiries, please contact the Corporate Secretary's Department:
Scotiabank
Telephone: (416) 866-3672
E-mail: corporate.secretary@scotiabank.com
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