Canadian Stocks Earnings Review – Big 6 Banks

Posted on August 29, 2021 by Mathieu Litalien

See what founder Dan Kent is investing in right now

Dan is on blossom with over 20,000 Canadian investors sharing insights and real-time trades:

Another quarter is in the books for Canadian stocks and its time to once again take a look at the performance of Canada’s Big Banks. This past quarter was shaping up to be an interesting one.

Estimates had been trending downwards and the general consensus was that Canada’s Big Banks were not going to crush estimates like they did in the second quarter. While growth was still expected to be strong year-over-year, the macro environment led analysts to temper their expectations.

With that said, let’s take a look at how they performed.

Strong quarterly results

Canada’s Banks were able to post strong quarterly results, once again defying analysts’ expectations. Almost across the board, the Big Six beat on the top and bottom lines.

The lone exceptions were National Bank (TSE:NA) and the Bank of Nova Scotia (TSE:BNS). National Bank beat on earnings, whereas revenue was in line with expectations. For its part, the Bank of Nova Scotia beat on earnings but missed on revenue – granted it was a slight miss ($10M).

Bank of Nova Scotia (TSX:BNS) held back by international segment

It is worth noting that the Bank of Nova Scotia continues to be held back by its international segment. Latin America has not rebounded from the pandemic as quickly as North America, and results in this area continue to weigh on the company.

While PCL’s did improve, the $380M it booked in the quarter was in large part due to the $339M associated with its international banking segment. Except for the Canadian Imperial Bank of Commerce (TSE:CM) which posted PCLs of $99M, the remaining four banks all swung to a recovery in PCLs from big losses in the prior year.

The best YoY growth rates belonged to National Bank and the Bank of Montreal (TSE:BMO). National was the only bank to post double-digit revenue growth (+14.2%) and BMO came in just shy of double digits with 9.3% growth. Surprisingly, CIBC which is a traditional laggard also posted strong revenue growth of 7.4%.

The rest? Toronto-Dominion Bank (TSE:TD) and the Bank of Nova Scotia both eked out 0.4% revenue growth while Royal Bank of Canada (TSE:RY) was the only one of Canada’s Big Six to post negative YoY revenue growth (-1.2%). This is somewhat surprising given that Royal Bank was one of the few to actually growth revenue during the pandemic.

Best quarter in the Bank of Montreal (TSX:BMO)

Which had the best quarter? In my opinion, that distinction should be given to the Bank of Montreal. The bank crushed earnings estimates, and growth was equally as impressive. Given its strong performance, the Bank of Montreal has been of the best performing banks.

As of writing, BMO’s share price is up 39% and has been jockeying with Canadian Imperial Bank of Commerce and National Bank as the best performing bank of 2021.

Which quarter was the most disappointing? Unfortunately, the Bank of Nova Scotia continues to bring up the rear. The company’s international segment has been a thorn in its side for the better part of the past five years.

While bulls may argue that it has the highest upside once the International Segment recovers, it has been a similar narrative for years. The one thing it has going for it? It is one of the best valued banks at the moment thanks to underperformance vs peers (+21% YTD), it also sports the highest yield among the Big Six banks (4.6%).

See what founder Dan Kent is investing in right now

Dan is on blossom with over 20,000 Canadian investors sharing insights and real-time trades:

Disclaimer: The writer of this article or employees of Stocktrades Ltd may have positions in securities listed in this article. Stocktrades Ltd may also be compensated via affiliate links in this post. Stocktrades Ltd will run advertisements on our posts. These advertisements do not represent an endorsement by us.

Mathieu Litalien

About the author

Mathieu is an individual investor and has been investing part-time for the better part of the past 20 years. He is primarily interested in fundamental analysis, focusing on the long-term and his portfolio is composed primarily of dividend-paying equities. Mathieu has a moderate risk profile and also looks for growth and value. His passion for finance and the markets have led him to his MBA and writing for Seeking Alpha and Stocktrades. Mathieu also focuses primarily on stock research and content production for Premium and the Stocktrades blog.