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What's in the Offing for Scotiabank (BNS) in Q2 Earnings?

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The Bank Of Nova Scotia BNS, also known as Scotiabank, is scheduled to report second-quarter fiscal 2022 results (ended Apr 30, 2022) on May 25, before market open. BNS’s earnings are anticipated to have improved from the year-ago period’s actuals, while revenues are likely to have witnessed a fall from the year-ago quarter’s reported figure.

In the last reported quarter, strong lending activity and revenue growth across all of its business lines drove the company’s better-than-expected results. Its credit quality improved, while the capital position remained strong.

Over the trailing four quarters, Scotiabank’s earnings surpassed the consensus estimate on all occasions, the average being 7.5%.

Bank of Nova Scotia The Price and EPS Surprise


Bank of Nova Scotia The Price and EPS Surprise
Bank of Nova Scotia The Price and EPS Surprise

Bank of Nova Scotia The price-eps-surprise | Bank of Nova Scotia The Quote

BNS’s activities in the to-be-reported quarter were inadequate to instill analysts’ confidence in its stock. Evidently, the Zacks Consensus Estimate for earnings in the fiscal second quarter of $1.54 has moved 4.3% south in the past 30 days. The figure indicates a 2.7% rise from the year-ago quarter’s reported figure.

The consensus estimate for revenues is pegged at $6.07 billion, suggesting a marginal decline from the year-ago quarter’s reported figure.

Factors at Play

During the February-April period, the global economy witnessed volatility amid the Russia-Ukraine war. Given this backdrop, Scotiabank’s diversified business platform, consisting of Canadian Banking, International Banking, Global Wealth Management, and Global Banking and Markets, is likely to have offered some top-line stability in the quarter to be reported.

In the quarter, the company’s International Banking segment is expected to have been driven by the additional purchase of a stake in Scotiabank Chile. With rate hikes, BNS is expected to have seen loan growth and margin expansion. Also, the bank is expected to have leveraged cost-cutting opportunities, which are likely to have accelerated earnings growth in the second quarter of fiscal 2022.

BNS’s focus on secured lending and the maintenance of a high-quality corporate and commercial loan book is likely to have aided lending activities in the quarter to be reported.

In the prior quarter, BNS increased its market share in residential real estate-secured loans in Canada. This is expected to have offered opportunities to cross-sell and generate additional revenues.

The company’s progress toward digital banking, including a rise in the customer adoption of digital channels and process automation within International Banking as a result of the bank’s focus on restructuring and simplifying processes, is likely to have improved the operating leverage.

However, any increase in retail mortgages and personal loans is likely to have affected BNS’s risk-weighted assets and capital position.

Here is what our quantitative model predicts:

Scotiabank does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP:  Scotiabank has an Earnings ESP of -1.55%.

Zacks Rank: Scotiabank currently carries a Zacks Rank of 3.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Foreign Banks

ItauUnibanco Holding S.A. ITUB posted recurring earnings of R$7.36 billion ($1.41 billion) for first-quarter 2022, up 15% year over year. Including non-recurring items, ITUB’s net income was R$6.74 billion ($1.29 billion), up 24.6%.

ItauUnibanco’sresults benefited from higher revenues and a rise in its credit portfolio. However, increased non-interest expenses, cost of credit charges and non-performing loan ratio acted as headwinds.

Deutsche Bank DB reported a first-quarter 2022 net income of €1.23 billion ($1.38 billion) compared with the year-ago quarter’s €1.04 billion. Also, DB reported a profit before taxes of €1.7 billion ($1.91 billion), up 4% from the year-ago quarter.

Deutsche Bank’s first-quarter results benefited from higher net revenues and lower expenses. Strong capital deployment activities in the quarter were other positives. An increase in provision for credit losses was an offsetting factor.

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Deutsche Bank Aktiengesellschaft (DB) : Free Stock Analysis Report
Itau Unibanco Holding S.A. (ITUB) : Free Stock Analysis Report
Bank of Nova Scotia The (BNS) : Free Stock Analysis Report
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