Canadian Banks' Third Quarter Good Overall
Nothing in the results materially changes our valuations.
The big six Canadian banks-- Bank of Montreal (BMO), Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CM), National Bank of Canada (NA), Royal Bank of Canada (RY), and Toronto-Dominion Bank (TD)--reported third-quarter results that were, on the whole, good once again. Adjusted earnings per share growth was 11% on average, credit quality remained excellent, and overall management outlooks have not wavered. Our fair value estimates for the banks did not change materially this time around, with most seeing slight increases due to the time value of money.
This quarter it was Bank of Nova Scotia recording one-time charges, largely related to its string of acquisitions; this hurt results as well as the bank’s share price after earnings. Since the second half of 2017, we have expected Scotiabank to underperform, which has happened. We don’t see the bank gaining much positive momentum over the short to medium term, as its current spate of acquisitions won’t turn accretive until 2020. Contrast that with Toronto-Dominion’s latest acquisition of alternative asset manager Greystone, which will turn accretive in year one based on adjusted results.
Eric Compton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.