On Tuesday, UBS initiated coverage on Bank of Nova Scotia (BNS:CN) (NYSE: BNS) stock with a Neutral rating and a set price target of C$67.00. The firm acknowledged the bank's new strategic direction aimed at achieving better returns on equity (ROE), which has lagged behind its peers for the past decade.
Bank of Nova Scotia is reported to be focusing on risk-adjusted margins, profitability, and prioritizing clients as it seeks to improve its ROE. UBS forecasts an ROE of 11% for 2024, increasing to 12% in 2025, and further to 13% by 2026. These projections suggest a gradual improvement, although they still fall below the peer average of 14% expected in 2026.
The analysis by UBS indicates that while the bank is making steady progress, the broader economic environment and industry-wide expectations of normalizing credit quality are factors that may influence investor confidence. The firm suggests that the sustainability of Bank of Nova Scotia's returns will be crucial in supporting its valuation multiple and potential re-rating in the future.
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