What are analysts expecting from Canadian bank earnings?
Analysts are watching for how higher interest rates are weighing on Canadian banks as the sector gears up to report earnings.
TD Bank and the Royal Bank of Canada are set to report earnings on Thursday. The Bank of Montreal and the Bank of Nova Scotia will report earnings on Aug. 29, while Canadian Imperial Bank of Commerce will report on Aug. 31.
Expectations that the Canadian economy will come under pressure in the months ahead have two investment experts calling for some weakness to surface in the banking sector’s expenses and revenue.
“The pressure point on the (big six) group and the industry right now is higher interest rates,” Ebrahim Poonawala, head of North American banks research at BofA Securities, told BNN Bloomberg in a television interview on Wednesday.
“If the narrative changes in the next six to 12 months we could be talking very differently.”
Poonawala noted that the bank he believes might feel the most pain this quarter is CIBC, at it is most the closely tied to the Canadian economy through deposits, commercial lending and residential products like mortgages.
“If you’re worried about the Canadian economy in a higher-for-longer rate environment and consumers being tight, I think the revenue growth challenges might be more pronounced (at CIBC),” he cautioned.
He believes TD Bank is in the best standing to weather any economic storm.
“In a world where funding cost pressure is another thing that banks are dealing with, I think both on capital and deposits, TD is better positioned,” Poonawala said.
Canadian bank stocks have underperformed the broader market for the past six months, and the expected weakness to come from this quarter could actually work to the industry’s advantage, John Aiken, head of Canada research at Barclays, told BNN Bloomberg in an interview on Wednesday.
“We’re not looking for great earnings out of the banks, but basically a reset in expectations have lowered the bar, and we do think there’s a possibility that the Canadian banks could surprise a little bit to the upside,” he said.
Despite this possible outcome, Aiken still remains on the sidelines when it comes to buying Canadian bank stocks right now as he forecasts there could be better buying opportunities in a few months time.
“We still think there’s a bit of a downside shock coming and that’s why we’re not saying to pile into the sector at this stage,” he advised.
The anticipated economic slowdown should lead to higher credit losses and hit the banking sectors expenses, he explained.
“We do think that’s going to put pressure on 2024 earnings,” he said.
TD Bank and the Royal Bank of Canada are set to report earnings on Thursday. The Bank of Montreal and the Bank of Nova Scotia will report earnings on Aug. 29, while Canadian Imperial Bank of Commerce will report on Aug. 31.
Expectations that the Canadian economy will come under pressure in the months ahead have two investment experts calling for some weakness to surface in the banking sector’s expenses and revenue.
“The pressure point on the (big six) group and the industry right now is higher interest rates,” Ebrahim Poonawala, head of North American banks research at BofA Securities, told BNN Bloomberg in a television interview on Wednesday.
“If the narrative changes in the next six to 12 months we could be talking very differently.”
Poonawala noted that the bank he believes might feel the most pain this quarter is CIBC, at it is most the closely tied to the Canadian economy through deposits, commercial lending and residential products like mortgages.
“If you’re worried about the Canadian economy in a higher-for-longer rate environment and consumers being tight, I think the revenue growth challenges might be more pronounced (at CIBC),” he cautioned.
He believes TD Bank is in the best standing to weather any economic storm.
“In a world where funding cost pressure is another thing that banks are dealing with, I think both on capital and deposits, TD is better positioned,” Poonawala said.
Canadian bank stocks have underperformed the broader market for the past six months, and the expected weakness to come from this quarter could actually work to the industry’s advantage, John Aiken, head of Canada research at Barclays, told BNN Bloomberg in an interview on Wednesday.
“We’re not looking for great earnings out of the banks, but basically a reset in expectations have lowered the bar, and we do think there’s a possibility that the Canadian banks could surprise a little bit to the upside,” he said.
Despite this possible outcome, Aiken still remains on the sidelines when it comes to buying Canadian bank stocks right now as he forecasts there could be better buying opportunities in a few months time.
“We still think there’s a bit of a downside shock coming and that’s why we’re not saying to pile into the sector at this stage,” he advised.
The anticipated economic slowdown should lead to higher credit losses and hit the banking sectors expenses, he explained.
“We do think that’s going to put pressure on 2024 earnings,” he said.
