Investors betting Canadian banks will continue to book robust profits — SkimNews
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- Canadian bank stocks have surged 24% this year heading into Q3 results, outpacing the S&P/TSX Composite's 14.6% climb and the KBW Bank Index's 13.6% gain for U.S. lenders
- Analysts estimate EPS could grow roughly 15% year-over-year, though Jefferies' John Aiken warned the elevated multiples mean earnings will need to "grow into their current prices"
- Scotiabank's Mike Rizvanovic expects upside surprise on consensus EPS, citing capital markets strength, stable-to-modestly-higher net interest margins, and improved commercial lending volumes, particularly U.S. exposure
- The Big Six report next week — Scotiabank and Bank of Montreal on Tuesday, National Bank on Wednesday, and RBC, TD, and CIBC on Thursday
- All six banks participated in Apotex's $1.3-billion IPO in June, the largest life sciences and pharma IPO in Canadian history, while RBC was the only Canadian bank among 23 bookrunners on the SpaceX IPO
- Commercial lending rose 1.7% month-over-month across the six biggest banks, with foreign-currency balances up 2.6% versus 0.5% domestic growth — CIBC's Paul Holden expects BMO, with its large U.S. commercial book, to benefit most
- Bank of America's Ebrahim Poonawala pointed to PM Carney's business-friendly agenda and the upcoming Canada Investment Summit in mid-September as catalysts for a multiyear investment cycle in which banks would be major beneficiaries
Why it matters: With bank shares at all-time highs and valuations stretching beyond historical averages versus U.S. peers, the Big Six need to deliver on the roughly 15% EPS lift to justify the rally. National Bank's Gabriel Dechaine flagged that the M&A question will surface on every earnings call — a catalyst the market hasn't priced in, even as banks publicly prioritize return-on-equity expansion over large takeovers.
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