BANK OF NOVA SCOTIA $44 - Toronto symbol BNS

BANK OF NOVA SCOTIA $44 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $44 billion; Price-to-sales ratio: 1.8; SI Rating: Above Average) is Canada’s third-largest bank, with total assets of $485.9 billion. Rising stock markets continue to help the bank’s trading division. In the three months ended July 31, 2009, the division’s earnings jumped 58.3%, to $470 million from $297 million a year earlier. The Canadian banking division’s earnings rose 8.0%, to $500 million from $463 million. This was largely because of two purchases the bank made last year: it paid $2.3 billion for 37.6% of CI Financial Corp. (Toronto symbol CIX), one of Canada’s leading mutual-fund companies, and $500 million for online broker E*Trade Canada. These additions helped push up the bank’s overall revenue by 11.9%, to $3.8 billion from $3.4 billion. However, writedowns of illiquid securities contributed to a 7.8% drop in overall earnings, to $931 million from $1 billion. Earnings per share fell 11.2%, to $0.87 from $0.98, on more outstanding shares. Loan-loss provisions soared to $554 million from $159 million, which also weighed on the bank’s earnings. Despite the jump, these are within the bank’s expectations. Bank of Nova Scotia should earn $3.50 a share this year, and the stock trades at 12.6 times that estimate. The $1.96 dividend yields 4.5%. Bank of Nova Scotia is a buy.

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