Scotia Bank's (BNS) Q1 Earnings Disappoint, Costs Flare Up
Zacks Investment Research | Feb 26, 2019 10:27PM ET
The Bank of Nova Scotia (TO:BNS) reported first-quarter fiscal 2019 (ended Jan 31) results before the opening bell, following which shares were down 2.92% on the NYSE. Adjusted net income for the quarter came in at C$2.3 billion ($1.7 billion), down 3% year over year. Results exclude acquisition-related costs.
Elevated expenses and provisions were on the downside. However, rise in revenues along with strong capital and profitability ratios were tailwinds.
Elevated Expenses & Provisions Recorded, Revenues Up
Total revenues came in at C$7.6 billion ($5.7 billion) in the quarter, up 7% year over year. This upswing stemmed from rise in net interest as well as non-interest income.
Net interest income came in at C$4.3 billion ($3.2 billion), up 10.3% from the prior-year quarter. Non-interest income climbed 3.1% from the year-ago quarter to C$3.3 billion ($2.5 billion).
Adjusted non-interest expenses were C$4.1 billion ($3.1 billion), rising 17.1% year over year.
Adjusted provision for credit losses was C$688 million ($516.8 million), up 26.5% year over year. The rise mainly resulted from higher provisions in Canadian Banking and International Banking.
Improving Balance Sheet
As of Jan 31, 2019, Scotia Bank’s total assets were C$1.03 trillion ($0.78 trillion), up 12% from the prior-year quarter. Net Customer Loans and Acceptances were up 12.5% from the year-ago quarter to C$584.8 billion ($445.5 billion). Deposits came in at C$690.9 billion ($526.3 billion), increasing 8.7% year over year.
Healthy Capital and Profitability Ratios
As of Jan 31, 2019, Common Equity Tier 1 ratio came in at 11.1% compared with 11.2% as of Jan 31, 2018. Further, total capital ratio came in at 14.6%, in line with the prior-year tally.
Return on equity for the reported quarter came in at 13.7% compared with 16.3% in the year-earlier quarter.
Steady Capital Deployment
Concurrent with the earnings release, Scotia Bank announced a quarterly dividend of 87 cents per share, up 2 cents.
Our Viewpoint
A diversified product mix and strong capital position will help Scotia Bank grow organically, as well as through acquisitions. Though mounting expenses remain a concern, the export-driven economy of Canada is likely to benefit from gradual recovery of the U.S. economy, in turn aiding the company’s sustainable growth over the long run.
Scotia Bank currently carries a Zacks Rank #3 (Hold). You can see Zacks Investment Research
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