Bank of Nova Scotia (NYSE:BNS) may have avoided problems associated with the mark-to-market and off-balance sheet phase of this cycle, but expectations that it will face more headwinds from the weak credit environment has prompted a downgrade.
BMO Capital Markets analyst Ian de Verteuil reduced his rating on the stock from “market perform” to “underperform” and lowered his price target from C$36 to C$29. His 2009 and 2010 earnings per share forecasts also fall from C$3.45 and C$3.95 to C$2.60 and C$2.35, respectively.
The analyst noted that Bank of Nova Scotia trades at an average price to book value but a premium price-earnings ratio. He told clients this reflects the Street’s confidence that this credit cycle will be different for Scotiabank.