This was certainly welcom news for investors and as a result, the Bank of Nova Scotia will maintain its Canadian Dividend Aristocrat status. However, the company announced a C$0.10 increase in the quarterly dividend to C$1.00 per common share, an 11% raise. When compared against historical payout ratios, the Bank of Nova Scotia was largely expected to announce a lower dividend raise than its peers. On the bright side, the bank did announce a higher-than-expected dividend raise. Until it can show sustained improvement in this area, it’ll continue to trail its peers. It is the main reason why the Bank of Nova Scotia has been the worst performing Big Six bank of the past decade. Unfortunately, it has not materialized yet and has had the opposite effect. Since the International Banking segment has taken longer to rebound, it has more upside. It is for this reason that the Bank of Nova Scotia has the highest upside.
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However, if this segment can realize its full potential, this will drive significant earnings growth for the company. The bad news? If the Omicron COVID-19 variant finds its way to Latin America, the segment may once again begin to weigh on financials. The good news on this front: International Banking segment earnings improved throughout 2021 and generated adjusted earnings of $1.86 billion, an increase of 62% compared to the prior year. This segment has taken longer to rebound from the pandemic as it was more severely impacted. The biggest headwind facing the bank is its exposure to Latin America. Canada’s banks are among the best capitalized in the world, and Scotiabank is no exception. The bank’s CET1 ratio came in at 12.3%, which is an increase of 50 basis points from the prior year. Is this a concern for the Bank of Nova Scotia? Not in the slightest. This means, that the full CET1 ratio of 10.5% is now in effect (up from 9% previously). This follows a net reversal of $27 million from last quarter, and the PCL ratio dropped by seven basis points.Īfter being reduced due to the pandemic, the Canadian domestic stability buffer returned to normal as of October 31. Provision for credit losses, a key industry metric, featured a net reversal of $50 million.
Not only were quarterly results mixed but the markets are once again becoming spooked by COVID-19 variables. Predictably, the markets didn’t exactly embrace these results as the stock dropped by 2.2% on the day of earnings.
Earnings of C$2.10 per share beat estimates by C$0.20, while revenue of C$7.69 billion missed by C$260 million. On November 30, the Bank of Nova Scotia released mixed quarterly results. (See Analysts’ Top Stocks on TipRanks) Mixed Q3 Results While it is likely the bank with the highest upside, I remain neutral on the stock. Unfortunately, the Bank of Nova Scotia ( BNS) has lagged its peers over the past number of years. Secondly, they were all poised to raise dividends since the Feds lifted the freeze a few weeks ago. From retail investors to pension plans, Canadians nationwide count on strong performance from their bank holdings. Why? Canada’s Big Six banks are among the most widely held stocks. The Canadian Banks earning season is among the most anticipated in the country.
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