Ratings & TP Changes RBC Dominion Securities’ Darko Mihelic continues to believe Bank of Nova Scotia’s (
) results will improve with continued loan growth momentum and the benefits of rate increases emerge.
He was one of several equity analysts on the Street to raise his financial expectations and target prices for shares of Scotiabank following Tuesday’s premarket release of stronger-than-anticipated fourth-quarter results. Adjusted earnings per share of $2.10 exceeded both Mr. Mihelic’s $1.97 estimate and the consensus projection of $1.90.
“Q4/21 was better than expected, driven by continued good credit performance and lower expenses. Loan growth momentum is starting to build in Canada and International P&C but NIM continued to compress QoQ from the shift in loan mix,” he said.
Mr. Mihelic emphasized Scotia’s sharp drop in PCLs in both its Canadian Banking and International Banking segments, falling almost 56 per cent quarter-over-quarter and 85 per cent year-over-year to $168-million (versus his $337-million projection). That prompted him to cut his total impaired PCL forecast for 2022 to $2.425-billion from $2.661-billion.
“Changes to our model mainly reflect lower assumed impaired PCLs in 2022 and 2023 for Canadian Banking and International Banking. We increase our non-interest income growth assumptions in Canadian Banking, but this was offset by lower forecast Corporate earnings and lower assumed loan growth in International Banking in 2023,” he said.
Keeping an “outperform” rating for Scotia shares, he raised his target to $99 from $89. The average on the Street is $92.64, according to Refinitiv data.
Other analysts making changes include:
* TD Securities’ Mario Mendonca to $95 from $90 with a “buy” rating.
* Canaccord Genuity’s Scott Chan to $89 from $88 with a “buy” rating.
* Cormark Securities’ Lemar Persaud to $98 from $90 with a “buy” rating.