The Bank of Nova Scotia (USA) (NYSE:BNS) has $740 billion in assets under management (AUM) as of May 2013. The bank believes in holding a well-diversified portfolio of investments. This diversification can be geographical or industrial, which helps in monetizing future growth opportunities. I am analyzing the top three companies of its portfolio, which recently took major steps including expansion efforts and new agreements in order to boost revenue.
| Name | Percentage of holdings |
|---|---|
| Royal Bank (NYSE:RY) of Canada | 15.85% |
| The Toronto-Dominion Bank | 11.32% |
| Enbridge (NYSE:ENB) | 6.79% |
P&C segment and wealth management will increase revenue
The Royal Bank of Canada (NYSE:RY) reported strong growth in Canadian personal and commercial (P&C) segment. This segment includes the whole Canadian retail banking business. It reported earnings of $1.05 billion in the second quarter this year, showing an increase of 12% year-over-year. The main revenue driver was strong growth of 9%, year-over-year, in its loan segment. Residential loans also reported 5% growth, year-over-year. As these loans are at an affordable price, the bank is expecting further growth. Currently, home loans are available with weaker credit, and they are expected to help in the economic recovery. Therefore, it is expecting a further rise of 6-7% in earnings from this segment in the second half of 2013. It is expected that the bank will have earnings growth of $4.36 billion in 2013, compared to $4 billion in 2012.
Wealth management is one of the major segments of the Royal Bank of Canada (NYSE:RY). The company reported earnings of $242 million in its second quarter 2013, as compared to $228 million in same quarter last year. The reason for high revenue growth was higher fee based revenue from rising AUM. Looking at market stability in the U.S. and market appreciation of 5-7%, the bank has further planned to expand this segment by increasing its takeovers range. The company will increase its acquisitions to a maximum $4.9 billion, from $1.90 billion. Earnings are expected to rise by 18%, year-over-year, this year to $902 million.
New agreements will boost market share
The acquisition of Target Corporation (NYSE:TGT)’s credit card operations by The Toronto-Dominion Bank (USA) (NYSE:TD) showed impressive results in the second quarter of 2013. The acquisition added $6 billion in credit card loans to the bank’s portfolio. The bank acquired credit card operations in order to increase its credit card market, especially in North America. Apart from acquisition, it also entered into a seven year agreement in which it will be the sole issuer of Target-branded Visa credit cards for Target Corporation (NYSE:TGT)’s U.S. customers. The Toronto-Dominion Bank (USA) (NYSE:TD) reported revenue increase of $168 million, that is 11%, as compared to its previous quarter, due to this acquisition. It is further planning to invest approximately $60-$80 million quarterly in its low yielding assets by selling its securities.
