In a report released yesterday, Ebrahim Poonawala from Bank of America Securities reiterated a Hold rating on Bank Of Nova Scotia, with a price target of C$88.00.
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Ebrahim Poonawala has given his Hold rating due to a combination of factors impacting the Bank of Nova Scotia’s stock. Despite the bank’s strong performance in the third quarter, where it exceeded earnings expectations and reported a higher pre-tax pre-provision income, the stock is still trading at a significant price-to-earnings discount compared to its peers. This discount, along with positive investor sentiment following the bank’s constructive outlook on the Canadian macroeconomic environment, contributed to a favorable stock reaction.
However, Poonawala maintains a Neutral rating as he sees better risk/reward opportunities elsewhere in the banking sector. While the bank has focused on improving its return on equity by deepening client relationships and exiting non-core exposures, achieving a return on equity of 12.4% for the third quarter, investors may require more substantial growth to feel confident in the sustainability of these improvements. The bank’s management has indicated that their client deselection program is nearing completion, which could lead to increased loan growth, but Poonawala remains cautious until these growth prospects are more evident.
Poonawala covers the Financial sector, focusing on stocks such as Goldman Sachs Group, BNY, and Citigroup. According to TipRanks, Poonawala has an average return of 14.5% and a 73.71% success rate on recommended stocks.
In another report released today, Barclays also maintained a Hold rating on the stock with a C$86.00 price target.