Analysts at Canaccord Genuity and Bank of America have upgraded their ratings for The Bank of Nova Scotia (BNS.TO), noting the potential for earnings growth and positive leadership changes.
In a note to investors, BofA Securities analyst Ebrahim Poonawala upgraded Canada’s third largest bank by market cap to a “buy,” writing that the market “is under appreciating the progress afoot to turn around the franchise under CEO Scott Thomson.”
BofA raised its price target from $73 to $90. Toronto-listed shares were trading at $78.01 as of 11:51 a.m. ET Tuesday, up 0.75 per cent.
In its fourth-quarter 2024 preview for Canadian banks, Canaccord Genuity also raised Scotia to a “buy,” with a price target of $84, up from $71 — the only rating change assigned to the lenders. According to analyst Matthew Lee, Scotia’s “current valuation and ‘low-hanging’ earnings growth make it attractive.”
The easing cycle at North American central banks will be “a prominent earnings driver” for the 2025 and 2026 fiscal years, Lee writes, with lower funding costs adding $425 million in incremental earnings. Canaccord expects earnings per share (EPS) to grow by 8.4 per cent year over year in the 2025 fiscal year (to $7.03), and 15.2 per cent in the 2026 fiscal year (to $8.10).
BofA Securities’ EPS estimates are rosier than Canaccord’s, at $7.18 and $8.50 for the 2025 and 2026 fiscal years, respectively. Poonawala writes that Scotia’s Thomson “has revamped the leadership team with external hires, sharpened focus on franchise profitability, while recalibrating capital deployment towards Canada/U.S.” These steps could yield around 300 basis points of return on equity improvement by 2027, the analyst says.
Poonawala notes that the spectre of trade tariffs during the Trump presidency “has the potential to weigh on Scotia’s growth outlook,” given the bank’s significant presence in Latin America.
In its Q4 preview, Canaccord Genuity adjusted price targets for the other banks without changing their ratings. Citing “a constructive growth environment, robust capital positions, and reasonable credit, all pointing towards mid-single-digit EPS growth” for the sector overall, price targets were raised almost universally — BMO from $125 to $143 per share, CIBC from $81 to $92, National Bank from $123 to $135, and RBC from $172 to $188 per share. TD’s price target was lowered from $91.50 to $89 per share.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf.
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