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After a stunning run of acquisitions, Bank of Nova Scotia is feeling the heat. Shares of Canada’s third-largest lender are suffering relative to rival Big Six banks, and the pressure is on management to prove its recent spate of deals was worth it.

In the past 10 months, Scotiabank has spent nearly $7-billion on acquisitions, including $2.6-billion on its purchase of asset manager MD Financial in May and nearly $1-billion for storied money manager Jarislowsky Fraser in February.

As Scotiabank acquired, its stock has struggled. Over the past year, shares of Canada’s Big Six banks have delivered an average return of 14 per cent, while Scotiabank’s stock is down 2.7 per cent.

This underperformance can be traced back to multiple issues. North American free-trade agreement negotiations weigh on Scotiabank more than its rivals because it has a large Mexican operation. Investors' recent fears about emerging markets also hurt the lender more than usual, because it is Canada’s most international bank – with a particular focus beyond Canada’s borders on what it calls the Pacific Alliance countries: Mexico, Colombia, Peru and Chile.

However, against this macroeconomic backdrop, Scotiabank decided to go buying, and that strategy “has triggered a variety of investor concerns,” National Bank Financial analyst Gabriel Dechaine wrote in a research report.

“Successful integration (i.e. execution) of recent acquisitions is arguably the most important driver of Scotiabank’s long-term upside potential,” he added.

Scotiabank could not be reached for comment, but chief executive Brian Porter has acknowledged in the past that buying is always the easy part. Making deals profitable, especially after paying hefty takeover premiums, is much harder work.

Canada’s banks have been big buyers in the wake of the 2008 financial crisis, spending a collective $40-billion on deals since, according to National Bank Financial. During this run, Scotiabank has been the most acquisitive lender, shelling out $13-billion, or 30 per cent of the sector’s total – and close to double the second-most active buyer, Royal Bank of Canada.

Scotiabank’s notable deals during this time frame include the purchases of DundeeWealth and ING Bank Canada, inked by former CEO Rick Waugh in 2011 and 2012, respectively. Mr. Porter spent the first few years of his tenure, which started in 2013, focused on cutting costs and reducing overlap in the bank’s international arm after a string of acquisitions overseas by Mr. Waugh. “I knew when I got this position, the first thing we had to do was something in the international bank, given that we’d been very acquisitive,” he told The Globe and Mail in 2016.

But now Mr. Porter must integrate his own deals, and investors seem skeptical of success. Using a price-earnings ratio, Scotiabank’s shares are now valued at their lowest level relative to its peers since the height of the recent oil and gas crash in 2016, which hurt the bank more than most rivals because it has a large energy-lending business in the United States. t hasn’t helped that Scotiabank issued a large amount of equity to help pay for one of the recent deals.

Despite the recent pressure, Scotiabank has argued in the past these deals will pay off in the long-run, and there is some acknowledgment they could pay enormous dividends.

In an August research note, CIBC World Markets analyst Rob Sedran noted the recent deals will increase Scotiabank’s scale and improved its market positioning in the Pacific Alliance, thanks to the acquisition of BBVA Chile, and its recent wealth-management deals at home will help the bank target richer clients, who offer the most profit margin.

“There is lots of work to be done and the easy part (cutting the cheque) is now in the past. To the extent the bank can execute as it has in the past, we think its strategic positioning has been advanced,” Mr. Sedran wrote.

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