Revenue Growth Set to Improve in 2022 for Scotiabank; Increasing Our Fair Value Estimate

Narrow-moat rated Bank of Nova Scotia reported solid fiscal fourth-quarter earnings. Adjusted earnings per share were CAD 2.10, beating Factset consensus estimates for CAD 1.92 and representing solid year-over-year growth compared with adjusted EPS of CAD 1.45 in the same period a year ago and higher than last quarter’s EPS of CAD 2.01. Provisioning continues to be a major driver of improved earnings, coming in at a cost of CAD 168 million this quarter, a multi-year low and materially lower than the CAD 1.1 billion charge the bank took in last year’s quarter. We would expect reserve releases to be much lower going forward. Revenue growth continues to be lackluster, down roughly 1% compared with last quarter, while adjusted expenses (CAD 188 million in restructuring and other provisions) were roughly flat.