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Scotia Bank (BNS) Q1 Earnings Improve Y/Y, Provisions Decline

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The Bank of Nova Scotia (BNS - Free Report) reported first-quarter fiscal 2021 (ended Jan 31) adjusted net income of C$2.4 billion ($1.9 billion), up 3.2% year over year. Results excluded certain one-time items.

Decline in provisions and expenses were positives. Also, strong capital and profitability ratios were driving factors. However, decline in revenues was discouraging.

Revenues Decline, Expenses Fall

Total revenues were C$8.1 billion ($6.3 billion) in the quarter, down nearly 1% year over year. The upswing stemmed from a fall in interest and non-interest income.

Net interest income was C$4.4 billion ($3.4 billion), down about 1% from the prior-year quarter. Non-interest income declined marginally from the year-ago quarter to C$3.7 billion ($2.9 billion).

Adjusted non-interest expenses were C$4.2 billion ($3.3 billion), down 4.8% year over year.

Adjusted provision for credit losses declined 17.5% to C$764 million ($593 million) on a year-over-year basis.

Strong Balance Sheet

As of Jan 31, 2021, Scotia Bank’s total assets were C$1.16 trillion ($0.9 trillion), up 2.4% from the prior quarter. Deposits came in at C$768 billion ($596.7 billion), increasing 2.4% sequentially.

Total loans were C$620.6 billion ($482.1 billion), up 1.6% from the previous quarter. Assets under administration were up 9.9% from the year-ago quarter to C$546 billion ($424.2 billion).

Healthy Capital and Profitability Ratios

As of Jan 31, 2021, Common Equity Tier 1 ratio was 12.2% compared with 11.4% as of Jan 31, 2020. Further, total capital ratio was 15.7% compared with the prior-year figure of 14.6%.

Return on equity for the reported quarter was 14.2%, stable with the year-earlier quarter.

Our Viewpoint

A diversified product mix and strong capital position will help Scotia Bank grow organically as well as through acquisitions. Though the coronavirus pandemic’s impact are concerning, the export-driven economy of Canada will likely benefit from the anticipated 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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Competitive Landscape

Barclays (BCS - Free Report) reported fourth-quarter 2020 net income attributable to ordinary equity holders of £220 million ($290.5 million), down 67.7% from the prior-year quarter.

UBS Group AG (UBS - Free Report) recorded fourth-quarter 2020 net profit attributable to shareholders of $1.71 billion, up significantly from the prior-year quarter’s $722 million.

HSBC Holdings (HSBC - Free Report) delivered fourth-quarter 2020 pre-tax profit of $1.4 billion against a pre-tax loss of $3.9 billion posted in the prior-year quarter.

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