Bank of Nova Scotia (BNS) Q2 Earnings & Revenues Decline Y/Y
The Bank of Nova Scotia BNS reported second-quarter fiscal 2023 (ended Apr 30) adjusted net income of C$2.17 billion ($1.6 billion), which declined 21.4% year over year. Results excluded certain one-time items.
A significant surge in provisions for credit losses and a rise in expenses hurt the results. Also, a decline in net interest income despite higher rates and lower non-interest income acted as an undermining factor. Yet, higher loan balance and solid capital ratios were the tailwinds.
After considering non-recurring items, net income was C$2.16 billion ($1.59 billion), down 21.4% from the prior-year quarter.
Adjusted Revenues Down, Expenses Increase
Total revenues were C$7.93 billion ($5.85 billion), down marginally year over year.
Net interest income was C$4.47 billion ($3.3 billion), which decreased slightly. Likewise, non-interest income declined modestly to C$3.46 billion ($2.55 billion).
Non-interest expenses were C$4.56 billion ($3.37 billion), up 10.2%.
Provision for credit losses jumped substantially to C$709 million ($523.4 million). The rise reflects an increase in loan balance and a deteriorating economic outlook.
Balance Sheet Strong
As of Apr 30, 2023, Scotia Bank’s total assets were C$1.37 trillion ($1.01 trillion), relatively stable sequentially. Deposits were C$945.5 billion ($697.6 billion), down marginally.
Net loans and acceptances were C$786 billion ($579.9 billion), up 1.2% from the previous quarter.
Capital and Profitability Ratios Solid
As of Apr 30, 2023, Common Equity Tier 1 ratio was 12.3% compared with 11.6% as of Apr 30, 2022. Further, total capital ratio was 16.2% compared with the prior-year figure of 15%.
Adjusted return on equity was 12.4%, down from 16.4% in the year-earlier quarter.
Our Take
A diversified product mix and strong capital position are expected to help Scotia Bank grow organically and through acquisitions. However, concerns related to macroeconomic conditions and rising expenses make us apprehensive.
Bank of Nova Scotia (The) Price, Consensus and EPS Surprise
Bank of Nova Scotia (The) price-consensus-eps-surprise-chart | Bank of Nova Scotia (The) Quote
Scotia Bank currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Canadian Banks
Bank of Montreal’s BMO second-quarter fiscal 2023 (ended Apr 30) adjusted earnings per share of C$2.93 declined 9.2% year over year.
During the reported quarter, BMO completed the acquisition of Bank of the West and its subsidiaries from BNP Paribas. The company recorded higher revenues, a rise in loans and deposit balances during the quarter. However, an increase in expenses and higher provisions were the undermining factors.
Toronto-Dominion Bank’s TD second-quarter fiscal 2023 (ended Apr 30) adjusted net income of C$3.75 billion ($2.77 billion) increased 1% from the prior-year quarter.
The company recorded a rise in net interest income on the back of higher interest rates and decent loan demand. Also, TD’s capital ratios were solid during the quarter. However, an increase in expenses and higher provision for credit losses were major headwinds.
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