Canada’s “Big Six” banks are often the most widely traded securities on the TSX, and for good reason. Canada’s financial sector has performed very well in recent years, supported by growing earnings and economic growth underpinned by outperformance in Canada and steady growth internationally.
Here’s why I believe Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) provides the most compelling growth option among its five largest competitors.
Bank of Nova Scotia remains the best global option for Canadian investors
Canadian investors looking to build a truly diversified portfolio often do not consider the long-term benefits of investing outside North America or Europe. Indeed, buying and selling securities on foreign global exchanges outside the Western world provides its challenges; that said, finding Canadian companies operating globally can provide investors with indirect exposure to said regions of the world without the high transaction costs of buying companies directly in countries in Latin or South America, for example.
Bank of Nova Scotia’s network of banks in Latin and South America, which I highlighted in a recent piece, has propelled the Canadian bank to become a top five financial institution in Mexico and Chile, with strong and growing operations in Peru and Colombia, nations with economies that are improving and that provide significantly higher growth potential than many slow-growth economies in the Western world.
Pacific Alliance provides a huge long-term opportunity for Bank of Nova Scotia
Fellow Fool contributor Demetris Afxentiou recently wrote an excellent piece covering the impact of the Pacific Alliance in Latin and South America, the name given to a series of trade pacts between Latin and South American countries Mexico, Chile, Peru, and Columbia. These trade pacts allow for freer trade and commerce between member countries, allowing for collaboration between these nations with the intent of spurring growth and, by default, creating a much friendlier environment for financial institutions, as commerce and trade continue to increase in this emerging niche of the global economy.
As I’ve pointed out in my recent analysis on the global exposure Bank of Nova Scotia provides its Canadian investors with, Bank of Nova Scotia’s exposure to Latin and South America is one of the most influential growth drivers behind the Canadian bank. During the company’s past quarter, a 15% growth rate was realized in its international operations — a growth rate other Canadian banks are likely drooling at.
As Bank of Nova Scotia continues to build its network of banks in Latin and South America, investors should expect growth outperformance with Bank of Nova Scotia as compared to its peers over the long term. Double-digit international earnings growth is nothing to scoff at, and investors ought to consider the long-term implications of Bank of Nova Scotia’s global nature when considering which Big Six bank to add to one’s portfolio.
That’s just my prediction. Find out more information on another prediction made by world-class investor Bill Gates: