Analyst outlines possibilities for Canada's largest banks
Canada’s largest banks are likely to see lower-than-anticipated average earnings-per-share in 2023, according to CIBC Capital Markets.
“We have taken a more conservative stance on forward assumptions,” said Paul Holden, analyst at CIBC Capital Markets.
Economists’ consensus, as polled by BNN Bloomberg, is anticipating EPS of 2.2% for Canadian banks. However, CIBC is predicting lower EPS growth of 1.5% for the Big Six this year, in defiance of the banks’ expectations of an average year for credit provisions.
“We find that hard to swallow given the significant move in borrowing rates, inflationary pressures, and an economic slowdown,” Holden said. “While consensus estimates appear to be broadly aligned with banks’ guidance, we think there is a high probability that numbers will have to come down further.”
In particular, TD Bank and Scotiabank face the greatest downside risk to EPS estimates, mainly due to provisions for credit losses and net interest margin sensitivities. Meanwhile, BMO and Scotiabank are the most sensitive to slower commercial loan growth.
