- The TSX financial index is down over 15 per cent year-to-date (YTD) while the TSX Venture financial index is down by over 16 per cent YTD.
- Manulife Financials stock declined by 28.75 per cent this year due to the impact of Covid-19 on business.
- Stocks of Bank of Nova Scotia is down by over 23 per cent this year.
The financial index on the Toronto Stock Exchange has been recovering since its last significant fall in March. But more than six months later, the index is nowhere near its pre-pandemic level. The profitable march for most Canadian banks, who are at the forefront of economic rebuilding, has slowed down. Stocks of financial houses such as Bank of Nova Scotia (TSX:BNS) and Manulife Financial Corporation (TSX:MFC) are currently down year-to-date (YTD), but making steady recovery.
While tech stocks went trending following the March market mayhem, financial stocks took a major hit. The top six banks in Canada deferred loan payments, created provisions for credit losses and lowered interest rates to ease the pressure on customers.
Financial stocks are a strong indicator of economic progress. The TSX financial index has lost over 15 per cent year-to-date (YTD) while the TSX Venture financial index is down by over 16 per cent YTD. In contrast, the TSX Composite index is down by just 4.88 per cent this year.
However, as economy rebounds, financial stocks are slowly recovering in the last quarter, as seen in the image below:
Manulife Financial Corporation (TSX:MFC)
Current Stock Price: C$18.77
The company provides life insurance and wealth management services to customers in the United States, Canada, and Asia. The company was recently recognized among 2020 World's Best Employers by Forbes. This month, the company announced reduction of management fees on some of its mutual funds and closed-end funds.
MFC STOCK PERFORMANCE
The current market capitalisation of the company is around C$37 billion. The stock has declined by 28.75 per cent due to the impact of Covid-19 on its business activities. However, it is trading flat in the last three months.
The company provides earnings per share (EPS) of C$1.95, profit-to-equity (P/E) ratio of 9.50 and profit-to-cash flow (P/CF) ratio of 1.80, as per data on the TMX. Positive return on equity (RoE) and return on assets (RoA) of 8.15 per cent and 0.46 per cent, respectively. The current dividend yield is 6.03 per cent.
MFC FINANCIAL HIGHLIGHTS
Manulife reported a net income of C$727 million in the second quarter ended June 30, 2020, down from C$1.47 billion same quarter last year. Its Canadian business segment reported US$342 million earnings, an increase of 8.77 per cent from Q2 2019 of US$ 312 million. New business value (NBV) in Canada decreased by 29 per cent from US$65 million in Q2 2019 to C$46 million in Q2 2020 due to lower sales volume. The sales volume declined from US$290 million in Q2 2019 to US$238 million in Q2 2020. The total core earnings of the global Manulife business increased by 5 per cent to US$1.6 billion, from US$1.45 billion in Q2 2019.
The company declared a quarterly dividend of C$0.28 per share.
Bank of Nova Scotia (TSX:BNS)
Current Stock Price: C$56.36
Scotibank has a current market capitalisation of C$68.27 billion.
As per data on the TMX group, the lender’s earnings-per-share (EPS) is C$5.75, profit-to-equity (P/E) ratio is 9.70, the profit-to-book (P/B) ratio of 1.086 and profit-to-cash flow (P/CF) ratio is 1.30.
The company announced quarterly dividends of C$0.90.
The YTD performance of the stock declined by 23.16 per cent. Return on equity was 8.3 per cent in Q3 2020, as compared to 11.5 per cent in the previous year. While the bank stocks have climbed from the lows experienced in March, they still have a way to make a full recovery.
BNS FINANCIAL HIGHLIGHTS
According to third-quarter results announced for the period ended July 31, 2020, the company reported net income of C$1.3 billion, a decline by 52 per cent from C$1,98 billion in Q3 2019. The Canadian bank reported adjusted earnings of C$433 million in Q3 2020. The total revenue of the bank in Q3 2020 is C$7.73 billion, as compared to C$7.66 billion in Q3 2019.
The provision for credit losses saw an increase of C$1.4 million or 206%, to C$2,181 million in Q3 2020, as compared to C$713 million in the same period, last year. The total allowance for credit losses as of July 31, 2020, stood at C$7,403 million. Gross impaired loans increased to C$5,148 million as of July 31, 2020, from $5,120 million last quarter, due primarily to new formations in the International commercial portfolio.