Skyline of the financial district

Scotiabank became the first big bank to raise its dividend since restrictions on doing so were lifted as it kicked off a week of bank earnings Tuesday.

The bank said it would boost its quarterly dividend by 10 cents to $1 per share and plans to buy back up to 24 million of its shares as it reported higher fourth quarter income, while also announcing an accelerated shift to digital for its international banking division.

The increased payment to shareholders and share buyback plan follow a decision by the Office of the Superintendent of Financial Institutions earlier this month to lift Covid-19-related restrictions and allow federally regulated banks and insurers to increase dividends, resume share buybacks and raise executive compensation.

Scotiabank chief executive Brian Porter said on an analyst call Tuesday that the payout increases come as the bank has more than recovered from the effects of the outbreak.

“Our business lines have returned to, or exceeded pre-pandemic earnings levels.”

He said the pandemic has also increased the pace of digital adoption in its international division, and that the trend hasn’t reversed as the pandemic recedes.

“Obviously, the pandemic changed a lot of things in terms of customer preference ? our digital sales in our international business have doubled since 2019. That’s a big number.”

In response, Scotiabank said it was taking a $126 million restructuring charge as it cut its international branches by 10% and full-time staff by 7% to create savings of a similar amount next year.

The reductions are to go ahead across its operations in Latin America and the Caribbean, where the bank said it’s seen digital adoption go from 35% to 50% in most countries, and above 65% in Chile and Colombia.

Porter said, however, that the bank isn’t seeing the same trend domestically.

“The acceleration and adoption of digital internationally is at a much faster rate than here in Canada in terms of customer preference, and we have to be aware of that and cognizant of that.”

The pandemic has also changed home-buying patterns and helped lead to a steep rise in house prices in Canada, especially compared with earnings, but Dan Rees, group head of Canadian banking at Scotiabank, said he expects softer demand going forward.

“We do believe that supply underpins price appreciation. And while that persists, should rates rise sooner in the year, as I think many of us are expecting, we expect that to soften demand.”

He said that money being passed down through families will be an important support for mortgage growth going forward, while also downplaying risks by noting the high credit scores of borrowers and the lack of growth in HELOC loans.

For the fourth quarter, Scotiabank said its net income totalled nearly $2.6 billion or $1.97 per diluted share for the quarter ended Oct. 31, up from $1.9 billion or $1.42 per diluted share in the same quarter last year.

Revenue totalled nearly $7.7 billion, up from $7.5 billion a year ago.

On an adjusted basis, Scotiabank said it earned $2.10 per diluted share, up from an adjusted profit of $1.45 per diluted share in its fourth quarter last year.

Analysts on average had expected Scotiabank to earn an adjusted profit of $1.90 per share, according to data compiled by financial markets data firm Refinitiv.

The increase in profit came as the bank’s provisions for credit losses fell to $168 million in its fourth quarter, compared with $1.13 billion in the same quarter last year and $380 million in its third quarter.

“The reversals in the provisions for credit losses drove that performance, and it’s essentially due to the improving macroeconomic forecast and strong credit quality,” said Carl De Souza, senior vice president and banking team lead at DBRS Morningstar.

He said that a key area going forward will be non-mortgage growth, including credit card loan balances that aren’t yet seeing much increase as clients still have extra cash on hand.

“Mortgage loan balances have driven the loan volumes, but going forward we would want to see what happens with the non-mortgage loan volumes.”

Scotiabank said its Canadian banking operations earned $1.2 billion, up from $778 million in the same quarter last year.

International banking operations earned $528 million, up from $263 million a year ago, while global wealth managing earned $385 million, up from $323 million. Global banking and markets earned $502 million, up from $460 million.

For its full financial year, Scotiabank said it earned nearly $10 billion or $7.70 per diluted share on $31.3 billion in revenue, up from a profit of nearly $6.9 billion or $5.30 per diluted share on $31.3 billion in revenue a year earlier.

Scotiabank’s adjusted profit for the full year totalled $7.87 per diluted share, up from $5.36 per diluted share.