Solid Quarter!! Overall as I alluded to in previous posts, this company is on a solid path to recovery! International earnings have stabilized and were solid, Canadian earnings are up. The only real negative in the quarter was provisions for potential bad loans and this was at consensus estimates, and lower than BMO in comparison to estimates.
These reserves will be taken back into earnings in future quarters, which will be a net positive for the company. my prediction is the rate of default will be low on loans simply because of a declining interest rate trajectory. This is exactly what we have seen in past economic cycles where most of the reserves are taken back as earnings with an actual low rate of default on loans both on the residential and business side .
As one other person posted and I completely agree, this is the only Canadian bank with a unique opportunity in the complete North American corridor of Canada, United States and Mexico. This in all likelihood is part of their strategy for deploying more capital to the US. They already have a significant concentration of profitable business in Mexico.
If you look at reports from Bloomberg Thompson Reuters Morningstar etc, it's evident the recovery is in place. Morningstar had a fair value rating of $77 on the stock even before today's earnings (reports available on CIBC and likely other platforms). Interestingly MorningStar had a fair value rating on BMO of approximately $104 before today's earnings.
I come to the conclusion Scotiabank has been in the penalty box far too long! In my view it represents a mispriced asset and we will see significant share price appreciation in the coming quarters. look at the comparative PE ratios with all of the other Canadian banks - IMHO there is no justification for such a low valuation.
Not promoting the stock: do your own due diligence just passing along my humble opinion! Also noteworthy, there's been no announcement to date of selling of any assets in the Pacific Rim including Ban Colpatria in Colombia. They are refocusing capital investment in the US so it will be interesting to see how they continue with all of their operations in the Pacific rim such as Chile, Peru, Colombia.
GLTA!!!