Company Reports

Narrow-moat-rated Bank of Nova Scotia reported solid results that were largely in line with our expectations. Net revenue increased 6% year over year and 2% from last quarter to CAD 8.4 billion, with fees and net interest income contributing to the growth. Adjusted net income fell 6% from last year but rose 35% from last quarter to CAD 2.2 billion. The annual decrease and sequential increase were primarily driven by the bank’s credit provisioning expense, which was CAD 962 million versus CAD 638 million last year and CAD 1.25 billion last quarter. As we incorporate these results, we do not plan to materially alter our CAD 70/$52 fair value estimate. We see the shares as only modestly undervalued.

Bank of Nova Scotia is the third-largest Canadian-based bank by assets and one of six Canadian banks that collectively hold almost 90% of the nation's banking deposits. It is known as Canada’s most international bank as it derives a little over half of its revenue from Canada, over 40% from international operations (primarily Latin America, namely Mexico, Peru, and Chile), and a single-digit percentage from the United States. Its domestic operations are more concentrated in mortgages and auto lending, with leading market share in autos. The bank has been expanding its domestic wealth operations significantly with its acquisitions of MD Financial and Jarislowsky Fraser, making it the third-largest active manager in Canada. The bank has been reworking its Latin America footprint, making acquisitions in markets it likes (Chile, Colombia) while reducing exposure to businesses and geographies that are less favorable as it attempts to consolidate better share within the area. The international exposure gives the bank the potential for higher growth and return opportunities compared with peers, but it also exposes the bank to more risks, as we've seen during the pandemic. While theoretically beneficial, the bank's international exposure has tended to be more of a headwind than tailwind.

Bank of Nova Scotia is the third-largest Canadian-based bank by assets and one of six Canadian banks that collectively hold almost 90% of the nation's banking deposits. It is known as Canada’s most international bank as it derives a little over half of its revenue from Canada, over 40% from international operations (primarily Latin America, namely Mexico, Peru, and Chile), and a single-digit percentage from the United States. Its domestic operations are more concentrated in mortgages and auto lending, with leading market share in autos. The bank has been expanding its domestic wealth operations significantly with its acquisitions of MD Financial and Jarislowsky Fraser, making it the third-largest active manager in Canada. The bank has been reworking its Latin America footprint, making acquisitions in markets it likes (Chile, Colombia) while reducing exposure to businesses and geographies that are less favorable as it attempts to consolidate better share within the area. The international exposure gives the bank the potential for higher growth and return opportunities compared with peers, but it also exposes the bank to more risks, as we've seen during the pandemic. While theoretically beneficial, the bank's international exposure has tended to be more of a headwind than tailwind.

Bank of Nova Scotia is the third-largest Canadian-based bank by assets and one of six Canadian banks that collectively hold almost 90% of the nation's banking deposits. It is known as Canada’s most international bank as it derives a little over half of its revenue from Canada, over 40% from international operations (primarily Latin America, namely Mexico, Peru, and Chile), and a single-digit percentage from the United States. Its domestic operations are more concentrated in mortgages and auto lending, with leading market share in autos. The bank has been expanding its domestic wealth operations significantly with its acquisitions of MD Financial and Jarislowsky Fraser, making it the third-largest active manager in Canada. The bank has been reworking its Latin America footprint, making acquisitions in markets it likes (Chile, Colombia) while reducing exposure to businesses and geographies that are less favorable as it attempts to consolidate better share within the area. The international exposure gives the bank the potential for higher growth and return opportunities compared with peers, but it also exposes the bank to more risks, as we've seen during the pandemic. While theoretically beneficial, the bank's international exposure has tended to be more of a headwind than tailwind.

Narrow-moat-rated Bank of Nova Scotia reported fiscal fourth-quarter results that were largely as expected, except for provisioning, which shot up 50% quarter over quarter. While we had expected some increase, this exceeded both our own and FactSet consensus expectations. Provisioning is notoriously difficult to predict and can be quite volatile quarter to quarter, although current results for Scotiabank signal that other Canadian banks are likely to see increased provisioning in the next quarter or two as well.

Narrow-moat-rated Bank of Nova Scotia reported improving fiscal third-quarter results. Expenses were roughly flat sequentially, better than the previous trend of increases, and revenue managed to grow sequentially, driven by fees and net interest income. Not all Canadian banks have increased their NII in the current quarter, so we view this as a positive sign. With results coming in as we expected, we will maintain our CAD 72/$54 fair value estimate. We await an updated strategy refresh for the bank, which will likely result in additional repositioning charges and new operational targets, so the next chapter for Scotiabank is still in its early stages.

Bank of Nova Scotia is the third-largest Canadian-based bank by assets and one of six Canadian banks that collectively hold almost 90% of the nation's banking deposits. It is known as Canada’s most international bank as it derives a little over half of its revenue from Canada, over 40% from international operations (primarily Latin America, namely Mexico, Peru, and Chile), and a single-digit percentage from the United States. Its domestic operations are more concentrated in mortgages and auto lending, with leading market share in autos. The bank has been expanding its domestic wealth operations significantly with its acquisitions of MD Financial and Jarislowsky Fraser, making it the third-largest active manager in Canada. The bank has been reworking its Latin America footprint, making acquisitions in markets it likes (Chile, Colombia) while reducing exposure to businesses and geographies that are less favorable as it attempts to consolidate better share within the area. The international exposure gives the bank the potential for higher growth and return opportunities compared with peers, but it also exposes the bank to more risks, as we've seen during the pandemic. While theoretically beneficial, the bank's international exposure has tended to be more of a headwind than tailwind.

Narrow-moat-rated Bank of Nova Scotia reported OK fiscal second-quarter results. Expenses kept increasing at a healthy rate, outgrowing revenue in the quarter, however, management struck a positive tone in the call, suggesting this pattern may begin to reverse for the rest of the year. Expenses came in a bit ahead of our previous expectations, and as we adjust our forecasts we anticipate a mid-single-digit percentage decline in our current fair value estimate of CAD 75/$55 per share. It remains difficult to predict the bank’s future expense levels as we await an updated strategy, which could result in additional repositioning charges.

Bank of Nova Scotia is the third-largest Canadian-based bank by assets and one of six Canadian banks that collectively hold almost 90% of the nation's banking deposits. It is known as Canada’s most international bank as it derives a little over half of its revenue from Canada, over 40% from international operations (primarily Latin America, namely Mexico, Peru, and Chile), and a single-digit percentage from the United States. Its domestic operations are more concentrated in mortgages and auto lending, with leading market share in autos. The bank has been expanding its domestic wealth operations significantly with its acquisitions of MD Financial and Jarislowsky Fraser, making it the third-largest active manager in Canada. The bank has been reworking its Latin America footprint, making acquisitions in markets it likes (Chile, Colombia) while reducing exposure to businesses and geographies that are less favorable as it attempts to consolidate better share within the area. The international exposure gives the bank the potential for higher growth and return opportunities compared with peers, but it also exposes the bank to more risks, as we've seen during the pandemic. While theoretically beneficial, the bank's international exposure has tended to be more of a headwind than tailwind.

Narrow-moat-rated Bank of Nova Scotia reported weaker fiscal first-quarter results. Revenue came in at CAD 7.98 billion, down 1% year over year, while expenses came in at CAD 4.46 billion, up 6% year over year. On an adjusted basis, pretax preprovision profits, or PTPP, were down 8% year over year as expenses rose, fees dropped, and net interest income is now stalling out.

Bank of Nova Scotia is the third-largest Canadian-based bank by assets and one of six Canadian banks that collectively hold almost 90% of the nation's banking deposits. It is known as Canada’s most international bank as it derives a little over half of its revenue from Canada, over 40% from international operations (primarily Latin America, namely Mexico, Peru, and Chile), and a single-digit percentage from the United States. Its domestic operations are more concentrated in mortgages and auto lending, with leading market share in autos. The bank has been expanding its domestic wealth operations significantly with its acquisitions of MD Financial and Jarislowsky Fraser, making it the third-largest active manager in Canada. The bank has been reworking its Latin America footprint, making acquisitions in markets it likes (Chile, Colombia) while reducing exposure to businesses and geographies that are less favorable as it attempts to consolidate better share within the area. The international exposure gives the bank the potential for higher growth and return opportunities compared with peers, but it also exposes the bank to more risks, as we've seen during the pandemic. While theoretically beneficial, the bank's international exposure has tended to be more of a headwind than tailwind.

Narrow-moat-rated Bank of Nova Scotia reported mixed fiscal fourth-quarter results. Revenue came in at CAD 7.63 billion versus our expectation for CAD 7.96 billion. Expenses were CAD 4.53 billion versus our expectation for CAD 4.28 billion. Backing out losses on divestitures, revenue would have been roughly in line. On this adjusted basis, pretax preprovision profits, or PTPP, were roughly 6% below our expectations for the quarter. Earnings per share of CAD 1.63 were slightly ahead of our forecast for CAD 1.59, but this was solely due to lower provisioning for credit losses, and we would place more emphasis on the core PTPP miss.

Bank of Nova Scotia is the third-largest Canadian-based bank by assets and one of six Canadian banks that collectively hold almost 90% of the nation's banking deposits. It is known as Canada’s most international bank as it derives a little over half of its revenue from Canada, over 40% from international operations (primarily Latin America, namely Mexico, Peru, and Chile), and a single-digit percentage from the United States. Its domestic operations are more concentrated in mortgages and auto lending, with leading market share in autos. The bank has been expanding its domestic wealth operations significantly with its acquisitions of MD Financial and Jarislowsky Fraser, making it the third-largest active manager in Canada. The bank has been reworking its Latin America footprint, making acquisitions in markets it likes (Chile, Colombia) while reducing exposure to businesses and geographies that are less favorable as it attempts to consolidate better share within the area. The international exposure gives the bank the potential for higher growth and return opportunities compared with peers, but it also exposes the bank to more risks, as we've seen during the pandemic. While theoretically beneficial, the bank's international exposure has tended to be more of a headwind than tailwind.

Bank of Nova Scotia is the third-largest Canadian-based bank by assets and one of six Canadian banks that collectively hold almost 90% of the nation's banking deposits. It is known as Canada’s most international bank as it derives a little over half of its revenue from Canada, over 40% from international operations (primarily Latin America, namely Mexico, Peru, and Chile), and a single-digit percentage from the United States. Its domestic operations are more concentrated in mortgages and auto lending, with leading market share in autos. The bank has been expanding its domestic wealth operations significantly with its acquisitions of MD Financial and Jarislowsky Fraser, making it the third-largest active manager in Canada. The bank has been reworking its Latin America footprint, making acquisitions in markets it likes (Chile, Colombia) while reducing exposure to businesses and geographies that are less favorable as it attempts to consolidate better share within the area. The international exposure gives the bank the potential for higher growth and return opportunities compared with peers, but it also exposes the bank to more risks, as we've seen during the pandemic. While theoretically beneficial, the bank's international exposure has tended to be more of a headwind than tailwind.

Narrow-moat-rated Bank of Nova Scotia reported a weaker fiscal third quarter. Adjusted earnings per share were CAD 2.10, representing growth of 4% year over year but growth of negative 4% quarter over quarter. The biggest point of weakness was fees, particularly within the more market and activity sensitive investment banking, trading, and wealth businesses. This is a pattern we have already seen start to play out for the U.S. banks, and we expect to see similar trends as the rest of the Canadian banks report. Despite weaker fees, net interest income and expenses remain essentially in line with our expectations. After adjusting our near-term fee outlook down, we are lowering our fair value estimate to CAD 85/USD 65 from CAD 87/USD 68.

Bank of Nova Scotia is the third-largest Canadian-based bank by assets and one of six Canadian banks that collectively hold almost 90% of the nation's banking deposits. It is known as Canada’s most international bank as it derives a little over half of its revenue from Canada, over 40% from international operations (primarily Latin America, namely Mexico, Peru, and Chile), and a single-digit percentage from the United States. Its domestic operations are more concentrated in mortgages and auto lending, with leading market share in autos. The bank has been expanding its domestic wealth operations significantly with its acquisitions of MD Financial and Jarislowsky Fraser, making it the third-largest active manager in Canada. The bank has been reworking its Latin America footprint, making acquisitions in markets it likes (Chile, Colombia) while reducing exposure to businesses and geographies that are less favorable as it attempts to consolidate better share within the area. The international exposure gives the bank the potential for higher growth and return opportunities compared with peers, but it also exposes the bank to more risks, as we've seen during the pandemic. While theoretically beneficial, the bank's international exposure has tended to be more of a headwind than tailwind.

Narrow-moat-rated Bank of Nova Scotia reported decent fiscal second-quarter earnings. Adjusted earnings per share were CAD 2.18, representing growth of 15% year over year but only 1% quarter over quarter. This was a solid beat compared with the CapIQ consensus estimate of CAD 1.96. The biggest reason for the quarterly earnings beat was provisioning, which came in roughly flat with first-quarter results at a cost of only CAD 219 million, and the PCL ratio was also flat, remaining at only 13 basis points. We would expect these numbers to start normalizing higher eventually, but predicting the timing of such a normalization in credit remains difficult.

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.

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.

Bank of Nova Scotia is the third-largest Canadian-based bank by assets and one of six Canadian banks that collectively hold almost 90% of the nation's banking deposits. It is known as Canada’s most international bank as it derives a little over half of its revenue from Canada, over 40% from international operations (primarily Latin America, namely Mexico, Peru, and Chile), and a single-digit percentage from the United States. Its domestic operations are more concentrated in mortgages and auto lending, with leading market share in autos. The bank has been expanding its domestic wealth operations significantly with its acquisitions of MD Financial and Jarislowsky Fraser, making it the third-largest active manager in Canada. The bank has been reworking its Latin America footprint, making acquisitions in markets it likes (Chile, Colombia) while reducing exposure to businesses and geographies that are less favorable as it attempts to consolidate better share within the area. The international exposure gives the bank the potential for higher growth and return opportunities compared with peers, but it also exposes the bank to more risks, as we've seen during the pandemic. A return to political instability, higher credit losses, and inflation arguably all have higher likelihoods in these emerging markets than for Canada.