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Scotiabank Starts 2017 With Strong Earnings Growth

Investors like Bank of Nova Scotia (NYSE: BNS) because of its global reach as well as its exposure to the highly stable Canadian banking market, and over time, Scotiabank has found ways to grow both at home and abroad. Coming into Tuesday's fiscal first-quarter financial report, Scotiabank investors fully expected that the bank would be able to continue its winning ways, and the banking giant gave them favorable results that showed forward momentum heading into the 2017 fiscal year.

Let's look more closely at Scotiabank to see how it did and what it sees ahead.

Image source: Scotiabank.

Scotiabank earnings stay atop the $2 billion mark

Scotiabank's fiscal first-quarter results started 2017 on the right foot for the Canadian bank. Total revenue rose 8% to C$6.87 billion, which was almost exactly what those following the stock had predicted for the bank's top line. Net income jumped 11% to C$2.01 billion, and that produced earnings of C$1.57 per share. That figure was also in line with the consensus forecast among investors.

Looking more closely at the numbers, Scotiabank continued its run of solid fundamental results. Net interest income climbed 4%, but non-interest income from fees and other sources was up a much more impressive 13% from year-ago levels. Provisions for credit losses inched higher by about 3%, but expenses grew at a modest rate that helped support Scotiabank's bottom line.

Scotiabank's global reach proved its value during the quarter. The global banking and markets division, which had lagged in recent quarters, produced a 28% jump in net income. Fixed income recovered lost ground, and strength in Europe and within Canada also helped offset weakness in investment banking and in the Asia region. The international banking division also performed well, with net income rising 14% due to loan and deposit growth along with wider net interest margins and higher fee income. The core Canadian banking business enjoyed a 12% rise in net income, also benefiting from higher net interest income and revenue from wealth management services.

Improvements in capital position also boosted Scotiabank. The bank saw its common equity tier 1 ratio rise to 11.3% from 11% three months ago. Strong internal capital generation explained much of the advance.

CEO Brian Porter summed up the situation quite succinctly. "All our businesses delivered strong results," Porter said, "contributing to solid top line growth and a continued improvement in efficiency." The CEO also noted that the bank's strategic agenda has moved forward well, and an emphasis on customer relationships should help Scotiabank both close to home and internationally.

Can Scotiabank keep up the pace?

Scotiabank has identified key places where it expects to be able to move forward. In Canadian banking, improved product mix should help bolster profits. Solid growth in key Pacific Alliance countries should help the international banking business, while ongoing prowess in tapping into fixed-income and corporate lending globally will likely push Scotiabank's prospects forward around the world.

Investors in Scotiabank also got good news on the dividend front. The company raised its dividend by C$0.02 per share to a new quarterly payment of C$0.76 per share. That's a small boost, but Scotiabank made two increases in 2016, and it might be on track to follow that game plan this year as well.

Scotiabank investors didn't react very strong to the largely anticipated news, and the stock eked higher by just a fraction of a percentage point. Nevertheless, Scotiabank has participated in the general uptick in global financial stocks over the past several months. By demonstrating its ability to capitalize on worldwide trends favoring financial institutions, Scotiabank is setting the stage for further outperformance during the rest of 2017 and beyond.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends The Bank of Nova Scotia. The Motley Fool has a disclosure policy.