While the news was not all good for Canadian bank stock Scotiabank (TSE:BNS), investors were sufficiently encouraged by its recent earnings report to light a bit of a fire under it. In fact, shares were up nearly 1.5% in Tuesday morning’s trading as a result.
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Net income was down slightly, with Scotiabank posting $2.03 billion in the quarter. The same time a year prior, it posted $2.09 billion, which was a comparatively small loss against that quarter’s figures. However, there was a reason for this, as Scotiabank bolstered its provisions for credit losses by $391 million, raising the total to $1.4 billion. Earnings per share, meanwhile, also slipped, coming in at $1.48 per diluted share. That does not compare well against the year-ago quarter, which came in at $1.57. Revenue, however, was up, going from $8.35 billion a year ago to $9.08 billion now.
Scott Thomson, Scotiabank’s CEO, noted that there has not been a “…meaningful deterioration in credit,” but the bank’s “…base-case forward looking indicators have worsened.” Despite this, Thomson somehow suggests that “…the future looks bright for Canada,” despite “…weaker consumer and business confidence.”
Canadian Dollar Shorts Stepping Up
Scotiabank also released a bit of unexpected analysis from Shaun Osborne, who noted that hedge funds are “reloading CAD shorts.” Osborne noted that “CAD sentiment took another hit in the latest week’s data,” and while CAD short-covering saw a “trough” at the start of the month, investors have been “…reloading CAD shorts ever since.”
It did not help, as word from BMO’s chief economist Doug Porter noted, that domestic sentiment is in a tailspin. Porter noted that the economic outlook “…is nothing short of dire among consumers and businesses.” But given the recovery in the Toronto Stock Exchange figures seen of late, this has prompted some to wonder if consumer confidence surveys are that good an indicator to begin with.
Is Scotiabank Stock a Buy?
Turning to Wall Street, analysts have a Hold consensus rating on BNS stock based on two Buys and seven Holds assigned in the past three months, as indicated by the graphic below. After a 10.3% rally in its share price over the past year, the average BNS price target of C$76.25 per share implies 4.86% upside potential. .
