By Ketki Saxena
Investing.com -- Canada's largest banks are bracing for an earnings hit this month due to declining capital markets and mergers and acquisitions (M&A) revenues, according to a forecast by Royal Bank of Canada (TSX:RY) (RBC). RBC analyst Darko Mihelic revised down his profit predictions for five major Canadian lenders on Wednesday, citing a lack of deals.
Data compiled by Bloomberg indicates that the dollar value of mergers and acquisitions managed by the country's biggest banks likely plunged 77% in the fiscal third quarter compared to the same period last year. Consequently, overall earnings may dip 6% in the quarter, with Bank of Nova Scotia (TSX:BNS) and Canadian Imperial Bank of Commerce expected to face the most significant projected declines.
Mihelic's forecast adjustments also reflect lower capital markets revenue predictions based on the second-quarter results of major U.S. banks reported last month. However, Toronto-Dominion Bank (TSX:TD) may fare better than its peers, bolstered by the integration of Cowen Inc. Mihelic anticipates a 6.3% decline in capital markets revenue for Toronto-Dominion's capital markets unit, compared to a 10% fall for other banks year-on-year.
The banks are scheduled to start reporting their earnings towards the end of August. Notably, Mihelic doesn't provide estimates for his own bank, RBC.