Formerly known as the Bank of Nova Scotia, Scotiabank is the third largest bank in Canada, one of the Big Five-as the top five banks in Canada are called. The bank was originally founded in Halifax, Nova Scotia, from where it retains its name. A big name in the financial world of Canada, it was listed a decent 120 on the prestigious Forbes 2000 list. Listed as BNS in the New York Stock exchange and the Toronto Stock Exchange, it holds reasonably high assets of over 500 billion CAD. Scotiabank has the largest number of international branches amongst all Canadian banks. Its prominence is felt in Asia, Europe and Latin America, in particular. However, it has not opened its services extensively in the USA, contrary to its peers.
The year 2007 and 2008 were not optimistic for any financial institution and ScotiaBank was no stranger to fall outs. In 2008 the greatest hit to the business of the bank was the collapse of Lehman Brothers, a leading financial services organization in the USA. Scotiabank was forced to write down a huge sum of C$ 899 million, which stood for more than 4% of its common equity. In addition, credit, equities, commodities and foreign exchange, all suffered through the last two quarters of 2008. This too added to the losses incurred.
But the bank is on its way to recovery by strategic planning and schemes. For starters, large loans will be handled conservatively. It also plans to increase its capital ratio which is at 9.7% to a respectably high 10%. The Bank of Nova Scotia is the only bank in Canada which has not aggressively aimed to increase its capital ratio.
The current share price of the bank is at approximately C$ 45 and total outstanding shares, as reported at the end of the third financial quarter of 2009 is 1.02 billion. The assets have increased to a little more than C$ 499 billion and profits are at around C$ 2 billion. Earnings per share are also at a reasonable above C$ 2.
It continues to sell preferred shares to raise capital, a strategy which has helped many financial organizations in the past. It also gives out discounts as high as 2% on shares and dividends sales. The trade analysts have also started to give an optimistic view of 'neutral' from a firm 'sell' advice. This reflects the increasing confidence of the market, and at a reasonably low price than its peers, the shares of the bank can be bought and kept on some promise of future profits.
While the fallout of 2008 hit the bank hard, investors still consider to give in their moneys to Canadian banks, as compared to financial institutions in USA. This is accounted for the mandatory 7% capital ratio, indicative of the sustainability of the bank. While all banks have to maintain the mandatory ratio, ScotiaBank has held a ratio over and above the mandatory and continuing in its efforts to recover. Economist and analysts working for the bank claim that the recovery will be complete by 2011, and this gives ample boost in the mind of the investor to hold his or her shares, till the time is ripe to earn the benefits.