Higher taxes and spending increase BNS.US Q4 EPS misses

Scotiabank's fourth-quarter profit fell short of analyst expectations as higher taxes and increased spending on compensation and technology weighed on the bank's results, which showed adjusted net profit of C$2.12bn, up 29% year-on-year; and adjusted EPS of C$1.57, slightly below analysts' expectations of C$1.60.

"As the market digests these data, the fact that most of the disappointment is focused on the higher-than-expected tax rate should give the market some comfort," said John Aiken, analyst at Jefferies.

Scotiabank's Canadian banking business saw a 34 per cent year-on-year rise in net profit in the fourth quarter, while its international banking business saw a 14 per cent year-on-year rise. However, the bank's global banking and markets business saw a 3 per cent year-on-year decline in net profit, while non-interest expenses rose 6 per cent.

Since Scotiabank's chief executive Scott Thomson took over in early 2023, the bank has focused on investing in stable, low-risk countries along the North American trade corridor while curbing spending in Latin America. It has focused on growth in regions closer to Canada, such as Quebec, the US and Mexico, and the possibility of exiting some foreign markets, such as Colombia.

Scotiabank, which has been investing in the US alongside its rivals including BMO, RBC and TD, surprised the market by saying it would buy a 14.9 per cent stake in KeyCorp, which would expand its US business.