Scotia Bank (BNS) Q4 Earnings & Revenues Rise, Stock Down 1%

The Bank of Nova Scotia (TSX:BNS) reported fourth-quarter fiscal 2019 (ended Oct 31) adjusted net income of C$2.4 billion ($1.8 billion), up 2% year over year. Results exclude acquisition- and divestiture-related costs.

For fiscal 2019, net income on adjusted basis grew 3% to C$9.4 billion ($7.1 billion).

Quarterly results were mainly driven by increase in revenues, and rise in loan and deposit balances. Further, capital and profitability ratios were strong. However, higher expenses and provisions were the undermining factors. This perhaps was the reason why the company’s shares declined 1% following the release.

Adjusted Revenues, Expenses & Provisions Rise

Total revenues came in at C$8 billion ($6 billion) in the quarter, up 7% year over year. This upswing stemmed from rise in net interest and non-interest income.

For fiscal 2019, total revenues increased 8% to C$31.2 billion ($23.5 billion).

Net interest income came in at C$4.3 billion ($3.3 billion), up 3% from the prior-year quarter. Non-interest income climbed 12% to C$3.6 billion ($2.7 billion).

Non-interest expenses were C$4.2 billion ($3.2 billion), rising 6% year over year.

Provision for credit losses was C$753 million ($568.8 million), up 28% year over year. This rise mainly resulted from higher provisions in both retail and commercial portfolios.

As of Oct 31, 2019, assets under administration were up 8% from the year-ago quarter to C$558.4 billion ($424 billion). Further, assets under management increased 7% to C$301.6 billion ($229 billion).

Improving Balance Sheet

As of Oct 31, 2019, Scotia Bank’s total assets were C$1.09 trillion ($0.83 trillion), up 2% sequentially.

Deposits totaled C$733.4 billion ($556.9 billion), increasing 2%. Total loans were C$592.5 billion ($449.9 billion), up nearly 1%.

Healthy Capital and Profitability Ratios

As of Oct 31, 2019, Common Equity Tier 1 ratio came in at 11.1%, on par with the prior-year quarter level. Further, total capital ratio came in at 14.2% compared with 14.3% a year ago.

Return on equity for the fiscal fourth quarter came in at 13.3% compared with the year-earlier quarter’s 13.8%.

Our Take

A diversified product mix and strong capital position will help Scotia Bank grow organically and through acquisitions. Also, the bank’s efforts to restructure businesses through divestiture will help improve operating efficiency. However, steadily increasing operating expenses and higher credit costs remain major near-term concerns.

Scotia Bank currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates for Other Canadian Banks

Bank of Montreal (TSX:BMO) is scheduled to report on Dec 3, while both Canadian Imperial Bank of Commerce (TSX:CM) and The Toronto-Dominion Bank (TSX:TD) will announce results on Dec 5.

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