Bank of Nova Scotia Earnings: Decent Results, but Expenses a Bit Higher Than Expected

We believe Bank of Nova Scotia’s stock remains overvalued.

Michael Miller 3 December, 2024 | 9:06PM
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The Bank of Nova Scotia building is seen in Toronto, Canada on September 19, 2023.

Key Morningstar Metrics for Scotiabank


Bank of Nova Scotia BNS reported fiscal fourth-quarter results that were a bit weaker than we expected, mostly due to higher expenses, but not by enough to change our view. Net revenue increased 3% from last year to C$8.5 billion. Adjusted diluted earnings per share increased 28% to C$ 1.57, though this excludes a C$379 million impairment charge from the bank’s investments in China. These results translate to a return on equity of 10.6%, better than the prior-year quarter but still below the firm’s medium-term objective of 14%. As we incorporate these results, we do not expect to materially alter our C$71 per share fair value estimate for the stock.

The bank’s revenue growth came entirely from net interest income. Non-interest income declined to C$3.60 billion from C$3.66 billion last year. The increase in net interest income was from net interest margin expansion, as average loans decreased 2% from last year. Bank of Nova Scotia’s net interest margin increased slightly to 2.15%, though this was mostly due to asset mix, as the firm’s Canadian banking segment saw its net interest margin decline to 2.47% from 2.52% last quarter.

Credit losses were still a modest headwind for the bank in the fourth quarter. Credit provisioning did decrease from C$1.26 billion last year to C$1.03 billion, but the year-over-year decline was entirely due to lower provisioning for performing loans, which is typically driven by changes in projections or economic assumptions, not credit results. On the other hand, net write-offs increased to C$965 million from C$681 million last year and C$865 million last quarter. The bank anticipates that credit costs will remain elevated in the first half of 2025 but improve as time goes on, which fits our expectations. The bank should be able to easily handle credit costs as its balance sheet remains in a strong position, with a common equity Tier 1 ratio of 13.1%.


The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Bank of Nova Scotia55.26 USD0.88Rating

About Author

Michael Miller  is an equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

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