Low oil prices and continuing economic malaise are going to weigh on bank earnings more than expected, causing analysts at Canadian Imperial Bank of Commerce to reduce profit estimates.
“We have bent our earnings estimates lower through our forecast period, with a more pronounced impact later around and into (fiscal) 2017,” the analysts, led by Rob Sedran, wrote inside a note to clients this week.
“We now forecast growth of two per cent and five per cent in those years, respectively.”
Toronto-Dominion Bank is forecast to achieve the highest earnings rate of growth both in years, at 3.8 per cent and 6.2 percent.
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National Bank and Royal Bank of Canada are forecast to achieve the lowest growth rates in fiscal 2016, both below one per cent. However the growth rate is forecast to rise to three.9 per cent for National Bank in 2017, and 5.2 per cent for Royal Bank, which in fact had the highest rate of growth one of the big six banks in 2015, at 8.4 percent.
The lowest forecast rate of growth for fiscal 2017 belongs to Canadian Imperial Bank of Commerce, at 3.1 per cent. CIBC’s earnings grew by 5.7 percent in 2015 and are forecast to rise by 1.5 per cent in 2016.
The CIBC analysts said the big banks will probably have greater loan losses within the coming years, however they pricier the pain will be spread equally across the country.
“We’re not headed for the bomb shelter at this time and still assume this is a mini credit cycle confined mostly to the oil-exporting provinces,” they wrote.
