02:14 PM EST, 02/22/2024 (MT Newswires) -- Canadian banks begin reporting Q1/24 results on February 27.
National Bank's Gabriel Dechaine notes that the Big 6 bank stocks have underperformed the market by nearly 300 bps early into 2024. Shifting rate cut expectations have been a primary drag on performance. Also, commentary from bank management teams since the start of the year has been generally cautious.
Still, Dechaine believes the setup is favourable to investors with a timeline beyond the quarter, as cautious expectations have been well reflected in both EPS forecasts (consensus Q1/24E implies Y/Y decline of 9%) and EPS revisions over the past year (down 13%).
National is Outperform rated on BMO, CIBC and RBC. Top pick into the quarter is CIBC. The bank could benefit from rising mortgage margins, while also delivering better-than-average operating metrics. CIBC also has the second highest level of EPS contraction forecasted by consensus at negative 14% Y/Y (after TD at -15%) and below average forecasted PTPP growth (i.e., 1% vs. 3% industry average.)
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