Scotiabank CEO says bank will likely exceed targets

Chief executive Rick Waugh wouldn’t commit Tuesday to raising Scotiabank’s dividend in the near future even though he was confident that the bank will exceed its full-year targets after posting a 14 per cent increase in third-quarter profits.

Chief executive Rick Waugh wouldn’t commit Tuesday to raising Scotiabank’s dividend in the near future even though he was confident that the bank will exceed its full-year targets after posting a 14 per cent increase in third-quarter profits.

But Waugh hinted in a conference call that Canada’s most international bank could increase its dividend next year, though he refused to speculate on exactly when the move might be made.

“We’ll see how 2011 looks — and we look forward positively — but we’re not there yet,” he told analysts.

Scotiabank (TSX:BNS) kept its quarterly dividend unchanged at 49 cents per common share in the third quarter. That falls in line with other big Canadian banks that have decided to hold steady on dividend payments while the economy staggers and the Basel Committee works out details of new international banking rules that could affect future earnings.

The new Basel rules being made public in November will determine how much capital the banks have to keep on their balance sheets.

“The timetable that regulators have put out is a pretty good timetable to eliminate that (dividend payment) uncertainty,” Waugh said, noting that Scotiabank’s sustainable earnings and capital strength will also determine when the dividend is raised.

However, Waugh left analysts with a dose of optimism for 2010.

“Looking at our year-to-date performance versus our targets we are well positioned to meet — and in fact exceed — our full-year targets,” he said.

On Tuesday Scotiabank reported profits of nearly $1.1 billion, even as its capital markets division was hit by the same earnings decline experienced at other Canadian banks.

The bank said net income was the equivalent to cash earnings of 99 cents per share — missing analyst estimates by a penny, according to Thomson Reuters. That compared with $931 million in profits a year ago.

Total revenue was relatively flat at $3.78 billion, an increase of $11 million.

Earnings in the capital markets division tumbled 35 per cent to $305 million in the period as the bank faced a decline in revenues from trading operations.

Skittish investors have kept stock market trading restrained in recent months as economic uncertainty — particularly in Europe — wore down confidence and often left returns at a minimum.

The slowdown has impacted the capital markets divisions of other major Canadian banks, including Bank of Montreal (TSX:BMO), CIBC (TSX:CM), Royal Bank (TSX:RY) and National Bank (TSX:NA).

Toronto-Dominion Bank reports its quarterly earnings Thursday.

In its Canadian banking business, Scotiabank reported a 21 per cent increase in net income to $604 million from $500 million a year ago.

The international banking division’s profits rose two per cent to $317 million — up $5 million over last year — with the stronger loonie impacting the results.

Provision for credit losses were reduced to $276 million, down from $554 million from the same period last year.

“Lower than forecast provisions largely offset greater than anticipated weakness in trading revenues,” wrote Barclays Capital analyst John Aiken in a note.

“While better than some of the results reported by its peers, we would be surprised if today’s earnings received more than a lukewarm reception.”

Scotiabank has about 68,000 employees across its international operations, which are based in about 50 countries. The bank estimates is has about 14.6 million customers.

Shares of the bank were down 65 cents at $51.25 in late Tuesday trading on the Toronto Stock Exchange.

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