Scotiabank earnings highlights:
Q1 net income (adjusted): $2.37 billion (-14% Y/Y)
Earnings per share: $1.85
- The total portfolio of residential retail mortgages rose to $302 billion in Q1, up from $289 billion a year ago.
- 27% of the bank’s residential mortgage portfolio is insured (down from 28% in Q4). Of the uninsured balances, the average loan-to-value of this portfolio is 52% (up from 49%).
- Residential mortgage volume was up 7% year-over-year.
- Net interest margin in Q1 in Canadian Banking was 2.26%, up 7 bps from a year ago, “due to higher deposit spreads, reflecting the 425 basis points of Bank of Canada rate increases,” said Raj Viswanathan, Chief Financial Officer.
- Mortgage loans that were 90+ days past due rose to 0.11%, up from 0.9% in the previous quarter but still below the 0.12% reported in Q1 2022.
- Scotia raised its provisions for credit losses to $638 million in the quarter, up from $222 million a year ago. Provisions are funds allotted to cover any loan losses that may arise.
Conference Call
“Overall, the performance of our loan portfolios remains strong, and we are seeing a continued normalization of credit trends as customers adjusted to higher inflation and borrowing costs,” said Phil Thomas, Chief Risk Officer.
“Despite variable-rate mortgage customers seeing higher payments with a cumulative 425 basis point rate increase, given the structure of our variable rate product, deposits for this group remain above pre-pandemic levels,” Thomas added. “Variable rate mortgages remained stable at 37% of our total mortgage portfolio.”
Thomas added that Canadian Banking head Dan Rees’s “vision of diversifying [Scotiabank]’s revenue mix beyond mortgages and autos is the right one and will pay dividends over time.”
“Mortgage growth has slowed down. And that’s a market, it’s a market we all live in,” said Raj Viswanathan, Chief Financial Officer. “I think we know it quite well. Rate increases have been a big component of the slowdown in the RWA [risk-weighted assets] growth in the loan growth and therefore RWA growth.”
