There's More To The Rebound Than
Just Credit
Introducing Our F2011 EPS Estimates

We are introducing our F2011 EPS estimates, which are on average 27%
higher than our F2010 EPS estimates. Valuing the bank stocks on
reasonable valuation parameters, the group appears to have approximately
17% total return upside from current levels, on average.

A significant component of the EPS rebound is a recovery in NIMs, while
returning to modest asset growth of slightly above 6%, on average. We
believe early signs of NIM improvement can be followed up with better loan
pricing and, eventually, higher interest rates will also add to NIMs.

We expect loan losses to peak in F2010 and subside by 18% on average in
F2011. Interestingly, this is still above what we believe will be longer-term
loss rates, suggesting further possible upside to our newly introduced F2011
EPS estimates.

We are upgrading BNS to SP from SU and downgrading NA to SU from SP as
of Sept. 16/09. Near-term challenges could affect the stocks since the group
"looks" expensive on F2010 estimates. However, we believe investors can
go Overweight with the group and use short-term noise as an opportunity.