ScotiaBank Earnings: An Early Look

Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Bank of Nova Scotia (BNS 0.34%) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Canadian banks have developed a well-deserved reputation for being more stable than their American counterparts, and ScotiaBank has definitely benefited from strong conditions in the Canadian economy. But will the good times last for Canada and ScotiaBank? Let's take an early look at what's been happening with ScotiaBank over the past quarter and what we're likely to see in its quarterly report on Tuesday.

Stats on ScotiaBank

Source: Yahoo! Finance.

Will ScotiaBank top estimates again?
Analysts have been a bit more cautious on Bank of Nova Scotia over the past few months, pulling in their earnings-per-share calls by a total of $0.06. But that pessimism hasn't held the stock back, which has risen by about 7% since early December.

The entire Canadian banking industry has enjoyed strong economic tailwinds for a long time. A big rise in prices of natural resources like oil and gold have bolster the nation's resource-based economy, giving ScotiaBank and its peers huge opportunities to profit from capital-intensive business expansion. ScotiaBank actually stood out from the crowd by winning the Global Bank of the Year award from The Banker magazine.

But as I mentioned in my preview of Bank of Montreal (BMO 1.16%) last week, concerns about high levels of household debt led one credit-rating agency to downgrade ScotiaBank and Bank of Montreal, as well as Royal Bank of Canada (RY 0.85%) and Toronto-Dominion (TD 1.33%). A drop in the country's hot real-estate market probably wouldn't hurt the banks as badly as the financial crisis hurt U.S. banks, but it could still put a crimp in earnings for a while.

Unlike Toronto-Dominion, RBC, and Bank of Montreal, ScotiaBank hasn't focused its international efforts as much on U.S. expansion. Rather, it has worked hard to build a bigger presence in Asia and Latin America. As higher-growth areas with arguably more potential and less competition, those regions may prove to be good picks for ScotiaBank.

In its earnings report, look for ScotiaBank to give hints about the state of the global economy in the regions where it does business. If emerging markets start to heat up again, then the bank could outperform its Canadian peers.

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