The S&P/TSX Capped Financial Index moved down 0.22% on Wednesday, August 16. Meanwhile, the broader TSX Index suffered a marginal decline on the day. Today, I want to zero in on one of the top financial equities on the Canadian market: Scotiabank (TSX:BNS). This financial institution is often called “The International Bank” because of its large international footprint, particularly in Lain America.
In this piece, I want to discuss whether investors should look to snatch up this bank stock for its value and dividend at the time of this writing. Let’s jump in.
How has Scotiabank performed over the past year?
Shares of Scotiabank have dropped 3.6% month over month as of close on Wednesday, August 16. That has dragged the bank stock into negative territory so far in 2023. Its shares have now plunged 22% in the year-over-year period. Investors can see more of its recent performance with the interactive price chart below.
Will a shaky economy put pressure on bank stocks?
Canada’s annual inflation rate increased to 3.3% in the month of July. Experts and economists have warned that this uptick could spell trouble in the broader economy. Statistics Canada stated that higher mortgage costs, themselves a consequence of interest rate hikes, were the largest contributor to inflation. Higher inflation will put more pressure on the Bank of Canada (BoC) in an already difficult environment for Canadian consumers.
The country’s largest financial institutions will also experience challenges due to the uncertain macroeconomic situation. However, I’m still looking to snatch up these profit machines in the face of volatility.
Should investors be excited about Scotiabank’s next batch of earnings?
This bank is set to release its third batch of fiscal 2023 results on Tuesday, August 29. In the second quarter (Q2) of fiscal 2023, Scotiabank delivered adjusted net income of $2.17 billion or earnings per share (EPS) of $1.70 — down from $2.76 billion or $2.18 EPS in the previous year. In the first six months of fiscal 2023, adjusted net income fell to $4.54 billion compared to $5.52 billion in the first half of fiscal 2022.
Scotiabank’s Canadian Banking segment saw adjusted net income drop 10% year over year to $1.06 billion. The bank suffered a decline due to an increase in provisions for credit losses as well as non-interest expenses. Moreover, its International Banking segment posted adjusted net income growth of 6% year over year to $650 million. That growth was powered by higher revenues and positive foreign currency translation.
For its other segments, Scotiabank reported adjusted net income of $359 million in Global Wealth Management — down 13% from the prior year. Moreover, Global Banking and Markets net income plunged 18% to $407 million.
Why I’m buying this top bank stock today
Scotiabank stock currently possesses a very favourable price-to-earnings ratio of 9.4. That puts this top bank stock in more attractive value territory compared to its industry peers. Meanwhile, the bank last paid out a quarterly dividend of $1.06 per share. That represents a very tasty 6.7% yield.
