Bank of Nova Scotia main branch in Calgary, Alberta

Scotiabank says it doesn’t see a recession ahead in any of its markets as it reported its first-quarter profit rose compared with a year ago.

The bank kicked off earnings results for the big Canadian banks this week with a first-quarter net income of $2.20 billion, up from $1.76 billion a year earlier.

The profit was up despite the bank setting aside $962 million for potentially bad loans, up from $638 million a year ago.

But the provisions were notably lower than the $1.26 billion it set aside in its fourth quarter of 2023 as its outlook for the year ahead improved.

“Our official forecasts are no longer calling for recessionary conditions in any of our operating geographies over the next few years,” chief executive Scott Thomson told a conference call with investors Tuesday.

The bank reported a strong revenue growth for its Latin American divisions, helped by rate cuts, while it said it doesn’t see a pickup in Canada until later this year.

“We expect the Canadian economy to underperform both the U.S. and our key Latin American countries early this year, but show some growth reacceleration in response to policy easing and more active residential real estate markets in the back half of the year,” Thomson said.

Despite persistent high interest rates, he said Canadian borrowers remain resilient and consumers are cutting back appropriately.

Scotiabank has been focused on boosting deposits, which can be a low-cost source of funding.

The bank’s efforts are paying off, reporting Canadian deposits up 9% from a year ago. The boost helped lower its borrowing costs to help it deliver an improvement on the crucial profit margin on loans, or net interest margin.

High interest rates have led to a muted mortgage market in Canada, but the bank said that’s been offset by continued growth in business banking and strong credit card momentum.

Overall its Canadian banking business reported 7% revenue growth, while international banking reported revenue up 16% from last year.

Total revenue for the three-month period totalled $8.43 billion, up from $7.96 billion in its first quarter last year.

On an adjusted basis, the bank says it earned $1.69 per diluted share in its latest quarter, down from an adjusted profit of $1.84 per diluted share last year.

The average analyst estimate had been for a profit of $1.61 per share, according to financial markets data firm Refinitiv.

The beat came thanks to higher-than-expected revenue, while higher net interest margins and international banking also helped lead to a positive result, said National Bank analyst Gabriel Dechaine in a note.