| Ahead of other banks reporting third quarter earnings over the coming days -- with both National Bank and RBC next tomorrow to follow the lead already set by Scotiabank earlier today -- Barclays noted that while weaker markets-related revenues weighed on Scotia's modest Q3 miss, buoyed by the BoC rate hikes, still domestic retail saw strong top-line growth with margin expansion, along with continued strong loan growth. And, while credit weakened it was still better than expected, while expenses were largely held in check. Among Key Takeaways, Barclays noted: - Capital Markets weighed again by volatility: Following a step down in Q2, weighed by another quarter of double-digit declines across trading revenues and investment banking fees, Scotia's capital markets revenues continued to retrace in the quarter, down 23% sequentially. - Credit weakened but was still better than expected: With net recoveries from performing loans abating, overall provisions for credit losses trended higher but still came in better than expected, as Scotia's total PCLs jumped to $412 million, up 88% sequentially, well below consensus estimate of $518MM but above the Barclays forecast of $400MM. - Domestic Banking earnings buoyed by Bank of Canada rate hikes: Net interest margins climbed 7 bps from Q2 and were up 6 bps from a year ago. Further, average domestic loan growth remained strong, up 3.3% sequentially and up 14% from a year ago. Buoyed by robust net interest income growth (+10% Q/Q), aided further by the longer quarter, Scotia's domestic banking earnings strengthened from Q2 levels. - Non Domestic Banking earnings weighed by higher non-interest expenses and credit losses: Earnings from Scotia's International Banking eased, down 1% sequentially but were up 20% from a year ago. Margins ebbed after a strong Q2 while lending volumes remained strong. - Wealth Management earnings were also weighed by market volatility: Earnings from Scotia's wealth management operations declined on both sequential (-7.2% Q/Q) and annual (-3.5% Y/Y) basis. Reflecting the negative impact from the market volatility, assets under administration and assets under management remained "challenged", both down roughly 2% from Q2 levels, Barclays said. Expenses held largely in check: On a consolidated basis, adjusted non-interest expenses at Scotia ticked slightly higher from Q2 levels, up 1% sequentially, and rising roughly 2.3% from a year ago. |