In the latest issue of The Successful Investor, we analyzed each of Canada’s big five banks. All of the banks have now reported earnings, except for Bank of Nova Scotia, which reports its first-quarter earnings tomorrow, March 4.
Note: Successful Investor subscribers will get our full analysis of Bank of Nova Scotia’s new quarterly results this Friday in our Email/Telephone Hotline.
BANK OF NOVA SCOTIA (Toronto symbol BNS; www.scotiabank.com) is Canada’s third-largest bank, with assets of $743.8 billion.
The bank continues to profit from its November 2012 purchase of ING Direct, which offers a variety of no-fee banking services. ING has 1.9 million customers and $30 billion in deposits. Bank of Nova Scotia will soon change ING’s name to Tangerine (it has to stop using the ING brand by May 2014). The change will let this business keep using the orange colour associated with ING Direct.
In its 2013 fiscal year, which ended October 31, 2013, the bank’s earnings rose 3.6%, to $6.7 billion from $6.5 billion in fiscal 2012. Due to more shares outstanding, earnings per share fell 1.3%, to $5.15 from $5.22. Without unusual items, including a gain on a real estate sale, per-share earnings rose 10.2%, to $5.08 from $4.61.
Canadian dividend stocks: Acquisition in Peru pushes up provision for bad loans
Revenue for Bank of Nova Scotia increased 8.3% in the latest quarter, to $21.3 billion from $19.7 billion. The bank gets 34% of its revenue from its international division, which provides financial services in Latin America and Asia. This division’s revenue rose 14.4%, partly due to a gain on the sale of a business in Thailand. Without that, revenue increased 10%, thanks to acquisitions.
The ING purchase increased revenue at the Canadian banking division (33% of the total) by 13.4%. Revenue from the wealth management and insurance division (18%) rose 14.0%, due to higher assets under management. Bank of Nova Scotia’s securities trading division (16%) saw its revenue rise 1.8%, as gains in Canada and Europe offset declines in the U.S. and lower commodity trading volumes.
In all, the bank set aside $1.3 billion to cover bad loans in fiscal 2013, up 3.5%, due to an acquisition in Peru.
The bank’s $2.48 dividend yields 3.9%.
In the latest edition of The Successful Investor, we assess Bank of Nova Scotia’s risk from volatile currency exchange rates in emerging markets. We also look at the bank’s earnings forecast for 2014 and the prospects for a dividend increase. We conclude with our clear buy-sell-hold advice on the stock.
(Note: If you are a current subscriber to The Successful Investor, please click here to view Pat’s recommendation in the latest issue. Be sure to log in first.)
If you’re a member of Pat’s Inner Circle and you’d like to ask a question about today’s article, please go to the question page reserved for you (be sure you’re logged in first). Click here to ask your question.
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