Cannacord Morning Coffee TodayBank of Nova Scotia (BNS : TSX : $34.12), Net Change: -0.08, % Change: -0.23%, Volume: 2,209,700
Pit boss, colour change, Resources in, Banks out! As we have moved through the Canadian Bank reporting season over the last week, it has become increasingly clear that attitudes towards the sector have changed, and the reaction to Scotia's earnings yesterday provides an excellent example of this shift in sentiment. The bank reported yesterday that it earned $0.75 per share in Q2F04, up 33.9% from last year and well ahead of the First Call estimate of $0.68 for the quarter. In addition, the bank raised its dividend by 20% to $0.30 per quarter. In previous quarters, strong results such as these would have sparked a significant rally in the shares, instead, BNS shares declined slightly on the news. This muted response from investors suggests that the earnings had already been priced into the shares, and confirms our thesis that the key driver of investor sentiment towards the banks is now the anticipation of higher interest rates rather than profit expectations.