Analysts say that Bank of Nova Scotia’s decision to hire a new CEO from outside its senior ranks is unusual, but most don’t think it will cause a big change in how the Canadian bank does business.
Bank of Nova Scotia (BNS) (BNS.TO) said on Monday that Brian Porter will step down as president and CEO on January 31, 2023, after being in charge for almost ten years. Scott Thomson of Finning International, who is already on the board of directors of the lender, will take his place.
In a note to clients on Monday, John Aiken, head of research in Canada and senior analyst at Barclays, said, “It’s surprising that the CEO of a Canadian bank comes from outside the organization or industry.” Aiken has given the company an equal weight rating and a price target of $86.00 per share for the next 12 months.
However, because Mr. Thomson has been on the board and on several committees, we don’t think the change will be jarring. We also don’t think Scotia’s strategy will change right away because Mr. Thomson has been involved in making it at the board level. “
Thomson has been on the bank’s board of directors since 2016. In mid-November, he will leave his job at Finning, which is the biggest dealer of Caterpillar equipment in the world.
“I’m sure that Scott Thomson will lead the bank through the next stage of its growth and development.” He is a proven leader who is focused on getting things done and whose values match those of the bank, Brian Porter said in a press release on Monday.
Nigel D’Souza, a financial services analyst at Veritas Investment Research, says that the timing of the change is not the best.
“The announcement seems to come at a bad time, given the macroeconomic uncertainty and market volatility,” D’Souza told Yahoo Finance Canada in an email. He also said that the decision to promote someone from outside the company was “unusual.”
The change in CEO is happening at a time when the financial markets are going down and people are worried about a coming recession caused by high inflation and rising interest rates.
On Monday, shares of Bank of Nova Scotia fell to their lowest price in the last 52 weeks. Over the past five years, the stock price has also done much worse than those of other big banks. As of early Monday, the shares of Bank of Nova Scotia were down about 15% in that time, while the shares of its four biggest competitors were up an average of 22%. Part of the problem has been that people are worried about how much the company is exposed to international banking. In the past few years, the Bank of Nova Scotia has sold assets to focus more on certain parts of Latin America.
But Thomson’s knowledge of Latin America could be useful to the bank.
Aiken said, “During his time as CEO of Finning, Mr. Thomson has led the company through tough market conditions and increased the company’s ability to make money, which has led to a higher return on invested capital, especially in Latin America.”
Analysts say that even though there are problems in Latin America, the bank is likely to stick to its plan for the most part.
Analyst Mike Rizvanovic at Keefe, Bruyette & Woods said in a client note on Monday, “Based on our first conversation with management, investors shouldn’t expect any major changes to BNS’s current strategy. “The LatAm region will continue to be a major focus for future growth.”
“The overall strategy is likely to stay the same, but we think the new CEO will try to improve how the bank works. This is especially true since BNS’ share price has done much worse than its Big Six peers over the past five years.
Rizvanovic has given the stock a rating of “market perform” and a price goal of $86.00 per share for the next 12 months.
READ MORE ARTICLES:
