On Tuesday, UBS initiated coverage on National Bank of Canada (NA:CN) (OTC: OTC:NTIOF) stock, issuing a Buy rating and setting a price target of Cdn$123.00. The firm highlighted the bank's diversified business model and strong credit quality as pivotal elements that support its above-average return on equity (ROE) and its premium valuation compared to its peers.
National Bank of Canada's recent move to acquire Canadian Western Bank (TSX:CWB) was noted as a strategic step to bolster its domestic earnings and expand its reach beyond Quebec. UBS anticipates this acquisition to bring mid-single digit earnings accretion following cost savings.
The firm forecasts a 7% growth in adjusted earnings per share (EPS) for National Bank of Canada in fiscal year 2024, followed by a 6% increase in fiscal year 2025. These projections are underpinned by the expectation of earnings growth, valuation multiple expansion, and a robust dividend, leading to an estimated total 12-month return of approximately 17%.
UBS's outlook for National Bank of Canada reflects confidence in the bank's ability to navigate the financial landscape effectively. With the integration of Canadian Western Bank expected to enhance the bank's performance, UBS sees a positive trajectory for investors over the next year.
The price target set by UBS indicates a bullish stance on the bank's future financial health and market position. Shareholders and potential investors of National Bank of Canada may look forward to the bank's continued growth and the realization of the potential returns outlined by UBS.
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