The Canadian banks look very interesting as we head into the final quarter of the year. Undoubtedly, the banking scene has been a story of haves and have-nots. Some of the better performers are right back to making new highs, leaving the rest of the lagging banks behind.
Scotiabank (TSX: BNS), also known as the Bank of Nova Scotia, is one of the laggards that has really struggled to score decent returns for investors in recent years. Over the past two years, shares of BNS are down just shy of 13%. Now off more than 23% from all-time highs, BNS stock stands out as a compelling bargain to bank on while the bear is in control.
As a more internationally-focused Canadian bank, those seeking greater long-term growth may have a lot to love about the name. Apart from its intriguing domestic banking business, Scotiabank also has exposure to the fast-growing Latin American market.
Scotiabank stock: Getting too cheap
Of late, big bets on such international growth haven’t really paid off. Though the tides will eventually turn, I’m not sure when Scotiabank’s Latin American business will start doing more of the heavy lifting.
As you may know, in times of economic turbulence, emerging markets tend to be a more volatile place to be. In any case, young long-term value investors should look to scoop up such internationally diversified companies while they’re in a rut. Rough economic climates certainly do not last forever.
Though they’ve lasted a few years now, I don’t think it makes a whole lot of sense to give up just yet. At the end of the day, Canadians should place more emphasis on the extremely long term.
Scotiabank’s intriguing bet on the U.S. banking
Recently, Scotiabank made an intriguing move, buying up a partial (14.9%) stake in American bank KeyCorp. (NYSE: KEY). It’s an intriguing deal, to say the least, and one that could help give shares of BNS a shot in the arm after underperforming for the last couple of years. Indeed, many Canadian banks have looked to the U.S. as a potential area to grow. And though Scotiabank may be just a bit late to the party, I do think it’s joining at a very opportune time.
Many of the U.S. banks (especially the more regional players) are in a bit of a rough spot right now. KeyCorp was one of the names that’s been really feeling the heat of late. As Scotiabank looks to expand its presence just south of the border, I think the Canadian banking legend becomes that much more interesting. Personally, I wouldn’t be shocked if Scotiabank will continue making such (partial) deals.
Who knows?
If things work out with its venture in the U.S., perhaps it’ll consider buying an entire U.S. bank outright. In any case, BNS stock looks cheap at 10.7 times trailing price to earnings, while it has a 6.64% dividend yield. It will surely take time for the U.S. voyage to work out. But in today’s rocky environment, I find Scotia’s latest U.S. bet is the start of an endeavour that could pay big dividends over the next decade.
