Normally, when a stock posts a decent earnings report, investors reward it by piling in because, after all, nothing succeeds like success. Sure, past performance isn’t indicative of future performance, but it’s still the best metric we have. There are exceptions, though, and Canadian bank stock Scotiabank (TSE:BNS) (NYSE:BNS) proved to be one of those, down fractionally in Tuesday afternoon’s trading despite a solid win.
The news was, for the most part, good. Earnings per diluted share came in at C$1.69, which was decently ahead of the C$1.56 per share analysts were looking for. Several key metrics were on the rise; interest income was up to C$4.69 billion against C$4.46 billion this time last year. Its global management unit was up 8% in terms of net income, thanks to a 6% rise in the Canadian market and a 19% rise internationally.
The capital markets segment brought in an extra 7% overall. Even future guidance looked decent, with executives suggesting that Canada’s period of tight-money policy was coming to its end and rate cuts would start reaching the consumer level in a few months.
Increasing “Share of Wallet”
Another point that’s helping Scotiabank—though not so much with investors based on today’s performance—is its increasing focus on “share of wallet.” The strategy focuses on improving on upselling customers, looking to get them to buy into more services beyond what they came in for, be it a mortgage or a credit card. That’s helping to not only produce the “balanced growth” the bank is looking for but also allowing it to maintain its “…strong capital and liquidity metrics.” However, it hasn’t come without risk; its provision for credit losses went from C$709 million a year ago to C$1 billion now.
Is Scotiabank a Buy or Sell Stock?
Turning to Wall Street, analysts have a Hold consensus rating on BNS stock based on five Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 3.47% rally in its share price over the past year, the average BNS price target of C$68.49 per share implies 5.1% upside potential.
Is BNS the Right Stock to Buy for Passive Income?
Before you hurry to invest in BNS, think about the following:
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