Barclays Capital announced steep cuts to the price targets for Canada’s banks ahead of their earnings reports later this month.
John Aiken, financial services analyst with Barclays Capital, reduced his 12-month price targets on Canada’s big banks by typically almost 20 % Wednesday, saying all six would be unlikely to write positive earnings growth this year.
“Ultimately admit the entire impact inside the energy decline will need time for you to be gone through through the Canadian economy in addition to longer to fully alter the banks’ credit quality, it’s difficult to miss the undeniable fact that the outlook for 2016 is shaping around be difficult than 2015,” said Aiken within the note to clients.
The discounted was among the steepest manufactured in yesteryear Twelve months among analysts covering Canada’s big banks. The sector generally remains under intense pressure this year, using the bank index of the TSX declining by Six percent and underperforming the broader S&P/TSX Composite Index.
Aiken said Canada’s banks should finally visit a dent inside their earnings, that have so far defied expectations, because they begin reporting later this month.
The Bank of Canada’s rate cuts last year as well as the possibility of more this year is predicted to weigh on net interest margins, since the loonie’s ongoing weakness threatens to harm consumer confidence and spending. Fears of further loan losses on oil investments may also be a problem.
So far consumer financing does not seem to be experiencing Canada’s weak economy, but Aiken notes that employment can be a key metric to look at this season. Canada’s labour market was surprisingly resilient in 2016, though unemployment remains slowly intervening recent months.
“When the domestic economy remain challenged and issues intensify, we anticipate the resiliency in the marketplace will probably be tested,” said Aiken. “Further, the newest data shows that employment growth remains challenged through the impact of low oil prices, which overall employment growth has slowed within the last year.”
Aiken’s price targets across the big six are below current prices. He’s an expense target of $60 on Bank of Montreal, $48 on Bank of Quebec, $74 on Canadian Imperial Bank of Commerce, $35 on National Bank of Canada, $58 on Royal Bank of Canada and $44 on Toronto-Dominion Bank.
