Decent Start to the Year for Scotiabank, Results Largely In Line With Our Expectations

Narrow-moat rated Bank of Nova Scotia reported decent fiscal first-quarter earnings. Adjusted earnings per share were CAD 2.15, representing growth of 14% year over year. The bank was able to record another quarter of relatively low provisioning as the credit environment remains benign, while revenue and expenses were each flat year over year. In other words, earnings growth was driven exclusively by declining reserve levels and low charge-off levels. These initial results are generally in line of where we expected the bank to be. We expect some additional balance sheet growth and higher rates will help net interest income see some growth as the year progresses, while we see low-single-digit percentage fee growth and stable expenses for the rest of the year. As such, we do not plan to make any material adjustments to our current fair value estimates of CAD 87/USD 68. We will note that Canadian bank names are generally reacting much less to the current situation than U.S. bank stocks. We’ve highlighted in the past that Canadian banks tend to be more stable names overall, and we believe they have much less rate risk exposure.