Can The Bank of Nova Scotia (USA) (BNS) Avoid a Canadian Housing Bust?

Page 1 of 2

On Tuesday, The Bank of Nova Scotia (USA) (NYSE:BNS) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed, kneejerk reaction to news that turns out to be exactly the wrong move.

The Bank of Nova Scotia (USA) (NYSE:BNS)Canadian banks came through the 2008 financial crisis with flying colors, as The Bank of Nova Scotia (USA) (NYSE:BNS) and its peers benefited from the more stable structural characteristics of the Canadian mortgage market. Yet while the housing market south of the border has retrenched to relative bargain-levels, Canadian real estate remains extremely expensive, especially in key markets. That has raised concerns of potential trouble ahead. Let’s take an early look at what’s been happening with The Bank of Nova Scotia over the past quarter and what we’re likely to see in its quarterly report.

Stats on Bank of Nova Scotia

Analyst EPS Estimate $1.26
Change From Year-Ago EPS 6.8%
Revenue Estimate $5.18 billion
Change From Year-Ago Revenue 16%
Earnings Beats in Past 4 Quarters 3

Source: Yahoo! Finance.

Can Bank of Nova Scotia keep growing this quarter?
Analysts have gotten more optimistic about The Bank of Nova Scotia (USA) (NYSE:BNS)’s earnings prospects in recent months, boosting their estimates for the April quarter by a penny per share and adding $0.04 to their full-year fiscal 2013 projections. The stock, meanwhile, has stayed in neutral recently, with a decline of about 1% since mid-February.

U.S. investors first became aware of the relative strength of Canadian banks during the U.S. financial crisis, but since then, they’ve realized the benefits of looking north of the border. Canada does have its own systemically important banks, which include not only The Bank of Nova Scotia (USA) (NYSE:BNS) but also Royal Bank of Canada (USA) (NYSE:RY), Bank of Montreal (USA) (NYSE:BMO), and three other large financial institutions, but high capital requirements have demonstrated their creditworthiness and relative safety.

Yet trouble could be brewing in the industry. Yesterday, Toronto-Dominion Bank (USA) (NYSE:TD) reported disappointing results for its most-recent quarter, with slowing loan growth in Canada despite having extensive U.S. operations that give it geographical diversity. Scotiabank also gets a substantial amount of business outside Canada’s borders, although the U.S. is only a small part of operations that extend throughout the Americas and Asia. Still, Canada represents more than half of The Bank of Nova Scotia (USA) (NYSE:BNS)’s revenue, and despite measures put in place by the Canadian government to protect the mortgage market, downgrades of Scotiabank as well as Bank of Montreal (USA) (NYSE:BMO), Toronto-Dominion Bank (USA) (NYSE:TD), Royal Bank of Canada (USA) (NYSE:RY), and several other Canadian banks from various credit agencies over the past year have made investors increasingly concerned about the state of the market.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!