Bank of Nova Scotia (BNS.TO)

Feels the caller's pain. In 2008-09, massive outlier because its business mix was so different than most NA banks. Since then, it just hasn't been rewarded. EM footprint has become a liability. Lot of positives in ongoing changes. Going to get more efficient. Disappointed, but too cheap to toss out. Valuation discount. Reasonable earnings growth. Good buy here.

He underestimated the amount of structural change at the bank, reducing its international exposure to focus on North America. He owns other banks and is winding down his BNS position.

The question was on his preference for the two banks. Both have international operations with BMO focused more in the U.S. and BNS more in Latin America. He prefers BMO. Now is not the time to buy BNS but watch it over the next four quarters,

Hasn't bottomed. First support is $55; if that doesn't hold, then $45. Internal operational issues. Financials have strong seasonality from January-March, but not this year. A ways from finding a bottom. If you need a bank, buy RY.

Good news here is that it's done such a poor job operationally, it's at a discount to peers. Upside in terms of a turnaround story. He owns at a low weighting. Hold, wait and see for the next quarters.

A major holding. The big question is what differences in strategy direction the new leadership will make? Maintain their large exposure to Latin America? They pay a bigger dividend at 6.7% than event CIBC and trades at a bigger discount in price-to-book. Dividend increases are possible.

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.
Unlock Premium - Try 5i Free

Can't learn much from what happens from day-to-day stock moves. Stock's gone nowhere in a very long time. Their acquisitions have not worked out, execution issues, got interest rate move in 2022 completely wrong. New management trying to right the ship. A show-me story. Not the highest quality bank. He prefers RY, TD, and NA. 

Historically most international of the Canadian banks. Performance of international assets not as good. Company trying to focus more on Canadian/US markets. Better options out there for investor. 

Decided to refocus in Canada and increase deposit base. Getting out of areas where returns were substandard, won't happen overnight. Valuation reflects this. Be patient, will turn around. Yield of 6.7%, safe.

Laggard of peers, mainly due to international exposure. EM business was challenged, but he likes that unique footprint. Likely to be more focused going forward. Inexpensive, less than 10x earnings, which takes care of some uncertainties. Yield north of 7%. 

Before you buy, look at the slides that come out of Investor Day today, but he'd be comfortable buying today.

Reported today and the street was disappointed by their earnings, because BNS had bigger than expected loan-loss provisions. We're entering a credit cycle that will last up to 6 quarters where lending will slow down. BNS is the only bank he owns. The CEO has been cutting costs and he's confident in him. If you have a 3-5-year horizon, you could enter this. Growthier areas in Latin America outside Canada could propel earnings in the future.

They have gone through a difficult period of time but the new CEO is changing and re-structuring the company. This will take time. It pays a good dividend. It used to trade at a higher multiple and is now close to the Book Value so it is quite cheap.

He used to be big fans of this, given their investment in Latin America to grow. But their execution hasn't been good, and they missed going into the US. They're now in a bad part of the market. He sold this 3-4 years ago.

One he likes, with the turnaround. A good time, generally, to start looking at the banking sector to get back in.