Opinions Stockchase Insights
Bank of Nova ScotiaBNS.TOBUYJan 05, 2024
Stockchase InsightsStock price when the opinion was issued
As of Jun 05, 2026. Market Open.
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It's charm amongst peers is its relative valuation. Fairly inexpensive at ~1.5x book value. Large Canadian banks have all done well, but this one has lagged. Most international of Canadian banks.
Strong capital base. Dividends should continue to increase over time. Very strong yield of 4.54%.
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The only one he still owns (plus a bit of TD). He'll get into banks again when prices are better.
When banks hit 12x PE, that means ROE is 8%. If the problems of GSY spread up the affluence chain, banks will have problems. Housing market is sloppy. Our economy is being bailed out by gold and oil prices. Yield is 4+%.
Bruce Murray
You probably don't want to add capital to a name that's moved significantly. Perhaps trim. The time to buy was when it was facing the uncertainty of a new CEO.
Canadian banks will have credit issues if CUSMA vaporizes. But in general, good franchises. Instead, look outside Canada; JPM is one to consider.
Premium contentBNS is one of five Canadian banks who have partnered to create the Defense, Security, and Resilience Bank (DSRB) designed to provide funding to the Government of Canada's commitment to boost military spending. We think the DSRB will create another avenue for business growth in the years to come. It trades at 19x earnings, 1.7x book and supports a 10% ROE. We like that cash reserves are growing, while debt is retired and shares bought back. It pays the highest dividend of the major Canadian banks, with a payout ratio at 75% of cash flow. We recommend setting a stop-loss at $95, looking to achieve $122 -- upside potential of 15%. Yield 4.1%
(Analysts’ price target is $101.69)Executing on new strategic plan. Still significant valuation gap between it and rest of Canadian banking sector, and that gap will continue to shrink over time.
Lorne SteinbergTransition is slow-going. Market didn't like its buying a stake in KEY. Question is: where are they going strategically? Meanwhile, you have cost-cutting, capital markets, and share buybacks. Money has flowed to the TSX this year driving banks higher, but nothing has fundamentally changed with this name.
If you're overweight, you could trim. No calamity on the horizon. He'd just want to see some heat come out of the market before purchasing.
Ryan BushellBecause he works there, he can't really discuss the merits of this particular bank. So he'll talk about the sector instead.
Great numbers across the board. Many raised dividends, ROEs are improving. Yield curve is more upward-sloping, which is helping. PCLs have been a concern and ticked up, but less than what market expected. Better growth numbers. Expectations for earnings numbers are being increased. All the names are looking good here.
When he looks at banks, he looks at the dividend and growth at the most reasonable price. BNS ticks those boxes. Looking really good despite its run, more to go.
If you own it, keep it; it'll be fine for the long term. Reported this week; lower-quality beat because it was on the backs of capital markets and wealth management. Stagnant loan growth, international PCLs are going up. Up 25% YTD, but lowest valuation of the group and highest dividend yield of ~4.6%.
Hard to put new capital into the banks right now, as all banks are trading at a premium. Plus, we're not at the optimal time in the credit cycle to invest in the banks.
Rebecca Teltscher
2023 was a choppy year for financials, across both the US and Canadian markets. All of the Canadian banks showed relatively weak performances in 2023 compared to the broader markets. BNS has had its issues with low growth in the Latin America regions, however, with its new strategic focus, we expect growth can pick up. BNS offers a higher yield than other Canadian bank names, and for investors seeking yield, this can be an important consideration. Its diversification in Latin America was also a benefit for the name, as it differentiated itself from other banks.
We expect a few things to happen this year that can benefit financial stocks. Downward pressure on rates and yields can improve investor sentiment around the bank stocks, as well as the fundamentals of the banks. Large provisions for credit losses were booked in the most recent quarter for most Canadian banks, and if the economic outlook for 2024 is better than expected, we can see these provisions be reversed in 2024, leading to higher profits. This also took place following 2020. Economic expansion and an improved business sentiment should help bank stocks, and we feel this can happen in 2024. As bond yields fall, the attractiveness of high-yielding bank stocks increases, and this should help with multiple expansion.
We continue to like BNS, as well as the other Canadian bank names, and feel that sentiment is nearing a low. These are names that can perform quite well in an economic recovery.
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