Bank of Nova Scotia (NYSE:BNS) stock rose 2.62% (As on November 29, 11:49:22 AM UTC-4, Source: Google Finance) after the company forecast its earnings will rise “marginally” in 2024, after the Canadian lender missed fourth-quarter profit estimates as uncertain economic climate prompted it to set aside more funds to guard against bad loans. For the fourth quarter, Scotiabank increased its provision for credit losses to C$1.26 billion ($927.90 million) from C$529 million a year earlier, as a result of unfavourable economic outlook and “continued uncertainty around the impact of higher interest rates.” Income from its Canadian unit, its biggest, fell 30.8%, while expenses rose 10% on an adjusted basis, driven by higher salaries and other costs. The bank said adjusted net income fell 36% to C$1.67 billion. The bank said last month it would cut about 2,700 jobs globally, or about 3% of its workforce. Its efforts to streamline operations resulted in a restructuring charge of C$258 million, Scotiabank said. Net interest income inched up, as aggressive rate hikes by the Bank of Canada allowed the lender to charge higher interest on loans. The bank said it had 89,483 employees at the end of the quarter, down about 1,500 from the previous quarter or a little over halfway to its three per cent reduction target. The bank also said it took an $89 million charge related to reducing its real estate footprint, and plans to close some branches. The bank said it had 2,379 branches and offices at quarter end, down 19 from three months earlier. The bank didn’t provide clarity in the quarter around how many branches in total it plans to shut, though it did confirm it would close eight branches in Newfoundland as part of a consolidation across various markets in Canada.

Further, the bank had $498 million worth of residential mortgages that were “non-performing” at the end of October. That’s up from $406 million a year ago but still a tiny percentage of their overall home loan portfolio, which came in at $271 billion during the quarter. That’s a decline of four per cent or $11 billion from just over $282 billion a year ago.

BNS in the fourth quarter of FY 23 has reported the adjusted earnings per share of 93 cents, missing the analysts’ estimates for the adjusted earnings per share of $1.19, according to Zacks Investment Research. The lender said earnings in the 2024 fiscal year to Oct. 31 would be impacted by “slowing economic growth across its markets and increasing regulatory capital requirements” but it would also benefit from interest-earning assets.

On the other hand, the results come just two weeks before Scotiabank is set to unveil a revamped strategy under Chief Executive Officer Scott Thomson, who took charge at the bank in February and has promised to focus on profitable growth and delivering shareholder returns. But as he looks to put a longterm plan in place, he must navigate high expenses, slower loan growth in Canada and slumping results in Scotiabank’s international operations, where credit losses returning to pre-pandemic levels have dragged down its lending portfolios in Chile and Peru.