Post by
Dibah420 on Jun 01, 2021 11:55am
BMO's Sohrab M
June 1, 2021 | 07:36 ET | 07:36 ET~
Scotiabank BNS-TSX Rating Outperform Price: May-31 $81.21 Target $88.00 Total Rtn 13%
First Look at Q2/21 Results Bottom Line: BNS's adjusted cash EPS of $1.90 beat our/consensus of $1.67/$1.76 helped by lower credit, including reserve releases on performing loans and lower expenses/better overall operating leverage.
All operating segments met or exceeded our expectations led by Canadian P&C (stable NIM sequentially; lower PCL; positive operating leverage).
Total bank PCLs of 32bps (Stages 1&2: (46)bps; Stage 3: 78bps) bettered our 46bps forecast.
Balance sheet remains strong with CET1 ratio of 12.3%/LCR ratio of 129%.
Key Points • Conservative Credit Provisioning; Reserve Releases in Quarter. The quarter included $496MM/32bps in PCLs and included $696MM of reserve releases on performing loans (total PCL of $764MM/48bps last quarter). Total allowances (specifics + collectives) now stand at ~$6.7B or ~192bps of credit RWA (vs. "through the cycle" average of ~141bps).
COVID-19 affected industries of Oil & Gas, Office and Retail Real Estate, Air Transportation, and Hospitality and Leisure accounted for ~$23B or ~3.6% of total loans & BAs (relatively unchanged from last quarter). •
PTPP income growth of ~2% y/y and +3.7% operating leverage, largely reflecting lower expenses (-6% y/y). NIX was 51.8% vs. 53.8% in Q2/20. Contraction in total bank non-trading NIM (hurt in part by changes in business mix and higher liquidity balances) to 270bps (down 9bps y/y; down 4bps q/q), were partly offset by stronger non-interest income, particularly in Global Wealth Management (strong net sales; AUA +20% y/y).
Trading revenue was down 19% y/y to $689MM from a near-record Q2/20 (prior 8-quarter average of $685MM).
• Strong ROE Despite Higher Capital Levels. ROE of 14.6% was driven by strong ROA of 80bps, notwithstanding higher capital levels, positioning the bank well for buybacks and dividend increases once regulatory restrictions are lifted. CET1 ratio of 12.3% up 10bps q/q. RWAs down ~1% sequentially on flat average overall loans & BAs q/q; RWA density was 35.2%, unchanged from last quarter and down from 37.8% in Q2/20. LCR was 129%, stable from last quarter and down from 132% last year (fiveyear average of ~127%).
Comment by
Capharnaum on Jun 01, 2021 1:32pm
BNS is now the cheapest Canadian Bank.