RY & Scotiabank (BNS) raise prime rate after BoC's move: Buy alert?

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RY & Scotiabank (BNS) raise prime rate after BoC's move: Buy alert?

RY & Scotiabank (BNS) raise prime rate after BoC's move: Buy alert?
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Highlights

  • Royal Bank of Canada (TSX: RY) and Bank of Nova Scotia (TSX: BNS), on the heels of the BoC announcement, also raised their prime lending rate, effective from March 3.
  • Some market analysts believe that benchmark interest rates can further increase to control the inflationary environment. 
  • This could mean that other banks like RBC and Scotiabank can also hike their lending rate following the footprints of the central bank.

The Bank of Canada (BoC) increased its benchmark interest rate to 0.5 per cent on Wednesday, March 2, despite the socioeconomic and geopolitical pressure stirred by the Russia-Ukraine war.

Just after that, Canadian lenders Royal Bank of Canada (TSX: RY) and Bank of Nova Scotia (TSX: BNS) also raised their prime lending rate, effective from March 3.

With this development, let’s delve into the details of RY and Scotiabank stocks.

Also read: Is TD Bank (TSX: TD) worth a buy as its profit surges 14% YoY in Q1?

Royal Bank of Canada (TSX: RY)

The lender increased its prime lending rate to 2.7 per cent, i.e., 25 basis points (bps), up from the previous rate.

Royal Bank’s Q1 net earnings increased by six per cent year-over-year (YoY) to C$ 4.1 billion in fiscal 2022. Its diluted earnings per share grew by seven per cent to C$ 2.84 in the latest quarter over the last one year.

Stocks of RBC rose by over 25 per cent in the past 12 months. The bank stock clocked a day high of C$ 139.76 during the trading session and closed at C$ 137.63 apiece on Wednesday, March 2.

RBC (TSX: RY)Q1 FY2022 results

Bank of Nova Scotia (TSX: BNS)

Scotiabank also increased its key lending rate to 2.7 per cent, following which its stock spiked by roughly three per cent to close at C$ 93.19 per cent on Wednesday, with 3.7 million shares switching hands.

Stocks of Scotiabank jumped by over 19 per cent in the past six months.

Scotiabank has a return on equity (ROE) of 14.72 per cent with a price-to-earnings (P/E) of 11.70 at the time of writing this.

Also read: Why is Kinross Gold (TSX: K) trending amid Russia-Ukraine war?

Bottomline

Some market analysts believe that the benchmark interest rates can further increase in the country as the Bank of Canada tries to control the inflationary environment. This could also see other banks also hike their lending rates.

Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.

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