-
Royal Bank of Canada (RY)
-
Toronto-Dominion Bank (The) (TD)
-
Bank of Nova Scotia (The) (BNS)
-
National Bank of Canada (NA)
Q: 5i team: a 10 years comparative chart of these 4 banks reveal a strong tendency of BNS to lag the rest and NA to grow faster. Is BNS having challenges in its management , or is Latin America investments pulling them down ? , Will they ever recover ? , would you recommend instead NA for a better growth ?, what is the downside of owning NA ?, thanks !!
5i Research Answer:
NA is smaller, and fairly concentrated (Quebec). This adds some risks, in addition to the usual banking concerns. BNS's Latin exposure has certainly been a drag on performance. The region has suffered economically and the strong US dollar is not helping, either. But this is at least partially reflected in valuation. At 8X earnings, BNS is well below historical mutliples (has averaged more than 10X for the past 8 years). NA has outperformed but is more expensive at 10X. So there is a trade-off here. Typically, underperforming banks tend to 'catch up' in the Canadian sector. We are OK with both right now.