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UPDATE: Credit Suisse Downgrades Scotiabank On International Growth Worries

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The Bank of Nova Scotia (NYSE: BNS) was downgraded Wednesday, by an analyst who cited weak core earnings and faltering international performance.

Scotiabank's fiscal third-quarter earnings, posted early Tuesday, were in line with expectations but stirred worries about its growth prospects. Shares opened sharply lower Tuesday.

Chief Executive Brian Porter wants to boost growth at Canada's third-largest bank by making acquisitions in Latin America.

But Kevin R. Choquett of Credit Suisse says Columbian credit markets are contracting and potential rate cuts in Chile, Mexico and Peru could put a further squeeze on Scotiabank's margins.

Choquett cut his rating to Neutral from Outperform and his target to $80 from $84. Separately, TD Securities downgraded the bank to Buy from Action List Buy.

Choquett said Scotiabank "lacks scale" in highly competitive Latin American markets and the company's low earnings growth rate in international operations are key reasons for the downgrade.

The bank operates in more than 55 countries and has billed itself as "Canada's international bank" because of acquisitions.

Its international operations grew revenue at the rate of five percent in the recent quarter. But that was offset by higher expenses and a 26 percent increase in loan loss provisions.

Canadian operations' earnings increased three percent matching its loan growth rate. But credit loss provisions grew 40 percent and expenses were up four percent.

Bank of Nova Scotia, which on Monday traded near its year-high of $74.93 a share, changed hands recently Wednesday at $72.07, off 0.52 percent.

Latest Ratings for BNS

DateFirmActionFromTo
Mar 2021CIBCUpgradesNeutralOutperformer
Feb 2021Credit SuisseMaintainsUnderperform
Jan 2021Credit SuisseDowngradesNeutralUnderperform

View More Analyst Ratings for BNS
View the Latest Analyst Ratings

 

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Posted-In: Credit Suisse Kevin R. ChoquettAnalyst Color Earnings News Downgrades Price Target Analyst Ratings

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