Canada’s economy expanded by 3.1% in the first quarter of fiscal 2023. This has reportedly renewed the internal debate at the Bank of Canada (BoC) to pursue yet another interest rate hike. I want to zero in on two of the Big Six bank stocks after their second-quarter earnings season. I’m going to lock in on one bank stock that I’m buying for sure and another bank stock that I’m selling are as quickly as possible.
Why “The International Bank” is still a bank stock I’m looking to buy right now
Scotiabank (TSX:BNS) is the bank stock I want to target after its second-quarter (Q2) earnings release. This bank stock is sometimes called “The International Bank” due to its wide global reach, particularly in Latin America. Shares of this bank stock have dropped 2.8% month over month as of close on May 31. The bank stock is still up marginally so far in 2023. Investors who want to see its recent performances can play with the interactive price chart below.
This bank released its Q2 fiscal 2023 earnings on May 24. Scotiabank delivered adjusted net income of $2.17 billion, or $1.70 per diluted share — down from $2.76 billion, or $2.18 per share, in Q2 of fiscal 2022.
Scotiabank saw its Canadian Banking segment delivered adjusted net income of $1.06 billion — down 10%, or $122 million, compared to the previous year. Meanwhile, adjusted net income in its International Banking segment achieved 6% year-over-year growth to $650 million. Adjusted net income in Global Wealth Management fell 13% year over year to $359 million.
Shares of this bank stock currently possess a favourable price-to-earnings (P/E) ratio of 9.7. Scotiabank stock offers a quarterly dividend of $1.06 per share. That represents a tasty 6.4% yield.
Here’s a Quebec-based bank stock that I’m shying away from after its Q2 earnings
National Bank (TSX:NA) is the smallest of the Big Six Canadian bank stocks. The Quebec-based bank often flies under the radar due to its small presence outside its home province. This bank stock has dropped 3.8% month over month as of close on May 31. Its shares are up 6.1% in the year-to-date period.
Investors got to see this bank’s Q2 fiscal 2023 earnings on the morning of May 31. The bank reported adjusted net income of $889 million, or $2.38 in adjusted diluted earnings per share — down 5% and 8%, respectively, compared to the previous year.
The bank reported net income of $335 million in its Personal and Commercial Banking segment in Q2 of fiscal 2023 — up from $293 million in Q2 of fiscal 2022. National Bank benefited from total revenue growth and was offset by higher non-interest expenses and higher provisions for credit losses. Net income rose 9% to $178 million in its Wealth Management segment while net income dipped 7% to $268 million.
Shares of this bank stock possess a middling P/E ratio of 10 at the time of this writing. Moreover, National Bank offers a quarterly dividend of $1.02 per share, which represents a 3.9% yield. This bank stock lacks the value pop and the income firepower of many of it stop peers in early June 2023.
