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Indeed, Scotiabank was the only member of the Big Six that failed to beat analyst expectations. it was also the only party that raised its loan loss provisions from $1.8 billion to $2.1 billion. Morningstar analyst Eric Compton said Scotiabank’s exposure outside of Canada, particularly in Latin America could stunt its recovery in comparison to the rest of the sector.
“I’d rather be in the camp where you need to count on Canada to get through COVID-19 as opposed to Canada plus Mexico, plus other parts of Latin America,” Compton said. “When you have to count on five different countries to get through, it could be a little more difficult and the risks would be higher.”
As for the other banks, Compton also doesn’t expect the record capital markets revenue to be sustainable and so the fourth quarter for these banks will rely on other portions of their businesses recovering and offsetting the difference.
The best opportunity to invest in these would’ve been when they bottomed out in late March, he said. There’s less upside with names like RBC and National Bank, which are less than 10 per cent away from reaching their pre-pandemic highs. That doesn’t mean they’re bad investments, it means that outperformance will be harder to come by. It also has a positive connotation.
“Part of the reason they’re higher priced is it seems some of the risks are evaporating,” Compton said.
Financial Post
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