Banks in Canada, where the industry is dominated by a handful of major players, will begin reporting quarterly earnings this week, with BMO Capital Markets expecting 4% annual growth in industry cash operating earnings per share.
“Our estimates call for positive EPS growth at all of the ‘Big 6′,” said analyst Sohrab Movahedi in an e-mailed note on Monday. The increases are seen highest at National Bank of Canada (NA.TO), Scotiabank (BNS) and CIBC (CM), with dividend hikes possible at Bank of Montreal (BMO), National Bank, Canadian Western Bank (CWB.TO) and Laurentian Bank (LB.TO).
Revenue in the industry is seen rising 7% in the quarter and expenses are seen as well managed, Movahedi said. Scotiabank is set to begin the earnings period on Tuesday before the US market opens.
“In Canada, we expect results to be helped by positive operating leverage and higher year-over-year risk-adjusted margins,” BMO Capital Markets said in an industry preview earlier this month. “International banking should also benefit from positive operating leverage on steady risk-adjusted margins.”
Movahedi has an outperform rating on Scotiabank and Toronto-Dominion (TD), with market perform ratings on Royal Bank of Canada (RY), CIBC, Canadian Western, National Bank, Bank of Montreal and Laurentian.
Canadian banks “operate diversified business models with attractive dividend yields and ROEs. The persistently low rate environment and a slowing domestic economy are earnings headwinds, somewhat offset by the banks’ restructuring efforts and focus on expenses.”
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