Bank of Nova Scotia Beats EPS Expectations on Lower Loan Provisions; Shares Fall 1%

Bank of Nova Scotia (BNS), Canada’s third-largest lender, is wrapping up Canadian banks’ earnings season by reporting, like its peers, a profit beat in the second quarter. Shares fell more than 1% in early trading Tuesday.

Net income came in at C$2.46 billion for Q2 2021 (C$1.88 per share), up from C$1.32 billion (C$1.00 per share) for Q2 2020. Excluding one-time items, the bank earned C$1.90 per share, while analysts forecasted adjusted earnings of C$1.76 per share.

Like other big Canadian banks that reported earnings last week, Bank of Nova Scotia benefited from a continued decline in provisions for credit losses.

Provisions fell to C$496 million from C$1.85 billion in the second quarter of 2020 when the pandemic started to cause closures in Canada.

Profit from the bank’s Canadian banking division rebounded strongly, rising 95% year-on-year to C$927 million.

However, Bank of Nova Scotia reported a decline in its capital markets division, unlike the other big Canadian banks. Net income fell to C$517 million, down 1% from the prior-year quarter.

Total revenue fell 3% to C$7.74 billion, C$70 million less than what analysts expected.

Bank of Nova Scotia President and CEO Brian Porter said, “We delivered another quarter of strong results reflecting the strength of our diversified business platform, and the solid economic recovery underway in our core markets. Our commitment to superior customer service was recognized in the J.D. Power 2021 Canada Retail Banking Satisfaction Study where the Bank rose to #2 among large banks and Tangerine was recognized as number one for the tenth consecutive year among mid-sized retail banks. Our commitment to strong ESG practices was also recognized with a rating of “AAA” in the MSCI ESG Ratings assessment, a rating held by only 2% of banks globally. We are very proud of these accomplishments.” (See Bank of Nova Scotia stock analysis on TipRanks)

Following the results, Canaccord Genuity analyst Scott Chan reiterated a Hold rating on BNS with an C$82.00 price target for 2% upside potential.

The rest of the Street is cautiously optimistic on BNS with a Moderate Buy consensus rating based on 4 Buys, 1 Hold, and 1 Sell. The average analyst price target of C$84.72 implies 5% upside potential to current levels.

TipRanks’ Smart Score

BNS scores a 7 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock returns are expected to be in line with the overall market.

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