BNS: New Management And Rising ROE Will Shape A Measured Rebound

Analysts have lifted their price target for Bank of Nova Scotia from about C$92 to roughly C$99, citing stronger expected revenue growth, improving profit margins, and room for valuation multiple expansion as returns on equity trend higher under new management.

Analyst Commentary

Bullish analysts have reiterated positive views on Bank of Nova Scotia, pointing to evidence that recent strategic changes are beginning to translate into better fundamentals and a pathway for the shares to narrow their valuation gap versus peers.

Bullish Takeaways

• Multiple price target increases into the high C$90s and low C$100s signal rising confidence that earnings power is improving and that the stock can re rate higher from a discounted valuation.
• Recent results are viewed as showing early but tangible progress under new management, including better execution on core banking initiatives and more disciplined capital allocation.
• As returns on equity trend higher, bullish analysts see room for valuation multiples to converge toward peer averages, supporting upside beyond the most recent price target hikes.
• The initiation of coverage with an Outperform view and triple digit price targets is seen as expanding the base of institutional support, potentially improving trading liquidity and reducing the stock's perceived risk premium.

Bearish Takeaways

• Bearish analysts remain cautious that, despite recent improvements, the bank's valuation discount versus peers reflects a multiyear track record of underperformance that could take time to fully reverse.
• There is concern that the anticipated ROE improvement may prove slower or more volatile than expected if credit costs normalize faster than revenue growth or if cost savings are harder to sustain.
• Some remain wary that, even with higher price targets, the shares already embed optimistic assumptions about operational turnaround, leaving limited margin of safety if execution stumbles.

What's in the News

• KKR is exploring a sale of its roughly CAD 7 billion, 40% stake in Pembina Gas Infrastructure, with Scotiabank advising on the potential transaction, highlighting the bank's role in large scale energy infrastructure deals (Reuters).
• From August 1, 2025 to October 31, 2025, Bank of Nova Scotia repurchased 7.6 million shares for CAD 668 million, completing a total of 10.8 million shares repurchased for CAD 913 million under its current buyback, indicating continued capital return to shareholders.
• Scotia Capital (USA) Inc. has been added as a co lead underwriter for Bank of Nova Scotia's fixed income offering, alongside SG Americas Securities, Goldman Sachs, and Citigroup Global Markets, expanding the syndicate for the deal.

Valuation Changes

• Fair Value Estimate has risen moderately from roughly CA$92.21 to about CA$99.07. This reflects a higher intrinsic value assessment for Bank of Nova Scotia shares.
• Discount Rate has fallen meaningfully from about 8.27% to roughly 7.25%. This indicates a lower perceived risk profile and cost of equity.
• Revenue Growth has increased from approximately 7.90% to about 9.50%. This suggests stronger expectations for top line expansion.
• Net Profit Margin has improved from around 24.74% to roughly 26.65%. This points to better anticipated profitability and operating efficiency.
• Future P/E has declined from about 14.63x to roughly 13.35x. This implies that stronger earnings expectations are not fully offset by valuation multiple expansion.