Earnings Recap: The Bank of Nova Scotia (NYSE:BNS)

The Bank of Nova Scotia (NYSE:BNS) reported earnings for the three months ended April 2016 on May 31, 2016. The company earned $1.48 per share on revenue of $6.59B. Analysts had been modeling earning per share of $1.43 with $6.44B in revenue.

Scotiabank reported second quarter net income of $1,584 million compared to $1,797 million in the same period last year. Diluted earnings per share were $1.23, compared to $1.42 in the same period a year ago. Return on equity was 12.1% compared to 15.1% last year.

During the second quarter, the Bank recorded a restructuring charge of $278 million after tax ($378 million pre-tax). Adjusting for the restructuring charge, net income increased 4% to $1,862 million and diluted earnings per share rose 3% to $1.46 compared to last year. Return on equity was 14.4% compared to 15.1% a year ago.

“The strength of our results this quarter underscores the continued strong performance of both our Canadian Banking and International Banking businesses,” said Brian Porter, President and CEO of Scotiabank. “Both businesses delivered solid asset and deposit growth and our strategy to deepen relationships with our customers has translated into growth. Partly offsetting our earnings growth were elevated loan losses in the energy sector, which are expected to decline beginning next quarter.

“Canadian Banking generated solid gains in both personal and commercial banking, which contributed to stronger operating results. A consistent focus on improving our business mix led to very strong deposit growth which supported targeted growth in assets that produce attractive returns for our shareholders.

“International Banking delivered a third consecutive quarter of at least $500 million of earnings. Earnings increased 12% from last year notwithstanding an elevated level of loan losses that are expected to decline over the second half of this year. The Pacific Alliance countries of Mexico, Peru, Chile and Colombia continued to deliver robust loan and deposit growth, which we expect to continue and reinforces our enthusiasm about the longer term potential for these markets.

“Customer behaviours and preferences continue to evolve, and Scotiabank is driving a digital transformation across all customer touch points in order to deliver a consistently excellent customer experience. The Bank’s investments to reduce structural costs, including this quarter’s restructuring charge, will contribute to the digital transformation of the Bank. Combined, these efforts should result in notable improvements in our productivity.

The Bank of Nova Scotia earnings per share showed a decreasing trend of 0% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 620%.Analysts project EPS growth over the next 5 years at 5.98%. It has EPS annual growth over the past 5 fiscal years of 8.1% when sales grew 3.7. It reported 11.5% sales growth, and -12.7% EPS decline in the last quarter.

The stock is trading at $51.39, up 48.47% from 52-week low of $35.01. The stock trades down -3.35% from its peak of $54.21 and % below the consensus price target of $51.81. Its volume clocked up at 1.04 million shares which is higher than the average volume of 0.92 million shares. Its market capitalization currently stands at $60.79B.

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