By Ketki Saxena
Investing.com -- Earnings from Canada’s big six banks begin tomorrow, with the Bank of Nova Scotia (TSX:BNS) kicking off the season tomorrow, and concluding with BMO (TSX:BMO) on the 30th of August, a week later.
In recent weeks, a number of analysts including at Credit Suisse (SIX:CSGN), Canaccord Genuity (TSX:CF), and JP Morgan have lowered their profit estimates and slashed their 12-month targets on the big six Canadian banks citing macroeconomic headwinds including high inflation, a housing slowdown and recession fears.
Canadian banks are expected to post declines in net income on average, of 4.5% to a combined $14.4 billion, as per analyst estimates, pressured by provisions for credit losses (PCL) and losses in capital markets with investment banking activity having slowed significantly.
Trading revenues, however, could surprise to the upside. Canada’s banks are also expected to benefit from increased interest rate margins and loan growth, which remains strong despite a slowdown in mortgage lending.
Compared to a year earlier, analysts expect the biggest EPS reductions at RBC and National Bank, due to their largest investment banking units. Analysts also note that valuations of National and RBC are trading at a more modest discount than their banking peers compared to their historical averages.
Scotiabank and TD (TSX:TD), with smaller exposure to markets, are expected to be the best performers, while BMO (which also has large capital markets exposure), Scotiabank, and CIBC (TSX:CM) are also expected to be relatively protected due to their larger exposure to personal and commercial banking.
Investors will also be expecting updates on major deals by BMO and TD in the United States. Updates on TD’s acquisition of First Horizon are particularly anticipated. The deal is expected to close by the end of November but is likely to face regulatory challenges.
Here’s what to expect at earnings from Canada’s big six banks at earnings in the coming week:
Bank of Nova Scotia, August 23
- Estimates for Q3: EPS: 2.12; Revenue 8.184 B
- In the previous quarter: EPS: 2.18; Revenue: 7.942 B
Royal Bank of Canada (TSX:RY), August 24
- Estimates for Q3: EPS: 2.67; Revenue: 12.093 B
- In the previous quarter:EPS: 2.99; Revenue: 11.22 B
National Bank, August 24
- Estimates for Q3: EPS: 2.34; Revenue: 2.479 B
- In the previous quarter: EPS: 2.55; Revenue: 2.491 B
TD, August 25
- Estimates for Q3: EPS: 2.05; Revenue: 10.631 B
- In the previous quarter: EPS: 2.02; Revenue: 10.481 B
CIBC, Aug 25, 2022
- Estimates for Q3: EPS: 1.83; Revenue: 5.577 B
- In the previous quarter: EPS: 1.77; Revenue: 5.376 B
BMO, August 30
- Estimates for Q3: EPS: 3.15; Revenue: 6.88 B
- In the previous quarter: Eps: 3.23; Revenue: 9.318 B
All currencies CAD.