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Globe editors have posted this research report with permission of Canaccord Genuity. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following is excerpted from the report:
In this report, we focus on Canadian banks' P/E valuation analysis relative to the S&P/TSX Composite, bank stock one-year return analysis under different P/E (NTM) multiple ranges, and looking at implied P/E taking into consideration each bank's excess capital.
Our main findings are as follows: 1) Group bank P/E (NTM) of 11.7x (vs. historical average of 10.9x) represents a 32 per cent discount to the TSX Composite (vs. 30 per cent historical average); 2) Banks trade at P/E (NTM) between 11-13x over 50 per cent of the time (since 2002) with price return over NTM lowest at 6 per cent on average; 3) Banks perform well historically when the group is trading above 13x; and 4) BNS' relative P/E valuation is most attractive (vs. historical) taking into account their excess capital position. At Q3/F17, BNS reported the highest CET 1 ratio at 11.3 per cent.
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