Bank of Nova Scotia, Toronto symbol BNS, continues to benefit from its growing banking operations in the Caribbean, Latin America, South America and Asia.
Last week, Bank of Nova Scotia agreed to buy 19.99% of the Bank of Guangzhou; the Chinese government owns the remaining 80.01%. This bank is the 29th largest in China, with 84 branches.
Bank of Nova Scotia will pay $719 million when the deal closes in December 2011. To put that in context, it earned $1.2 billion, or $1.11 a share, in the three months ended July 31, 2011.
The bank has operated in China for the past 29 years, and has the largest presence in that country among the big five Canadian banks. This experience cuts the risk of this latest investment. Bank of Nova Scotia’s expertise should also help Bank of Guangzhou expand its earnings and market share.
In the three months ended July 31, 2011, the bank’s earnings rose 19.1%, to $1.2 billion from $1.0 billion a year earlier. Earnings per share rose 13.3%, to $1.11 from $0.98, on more shares outstanding. If you exclude certain one-time items, the bank would have earned $1.14 a share in the latest quarter. That beat the consensus estimate of $1.12 a share.
The international division’s earnings rose 20.7%, thanks to strong demand for business and consumer loans. As well, Bank of Nova Scotia recently bought Uruguay’s fourth-largest private bank, and this acquisition also contributed to the higher earnings.
Earnings at this blue chip stock’s wealth-management operations rose 12.7%, mostly because the bank recently bought the 82% of DundeeWealth Inc. that it did not already own.
The Canadian banking division’s earnings rose just 4.1%, due to strong competition for depositors. Earnings at the Scotia Capital trading division fell 5.3%. This business’s earnings tend to be more erratic than those of this blue chip stock’s other operations.
The bank continues to pay quarterly dividends of $0.52 a share. The annual rate of $2.08 yields 3.9%.
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