GREY:CXSNF - Post by User
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midardon Apr 22, 2017 2:39pm
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Post# 26153024
National Bank researh report...
National Bank researh report...Bank Operations Drive Favourable Long-Term Outlook
HIGHLIGHTS
Adj. EPS of $0.02, below NBF and consensus of $0.03 Weaker-than-expected net gain on sale margins drove the miss.
2017 earnings could experience volatility
We maintain our view that new originations and gain on sale margins could vary significantly from our estimates as the Canadian housing market and Canadian bank funding partners adjust to the new mortgage insurance rules, changing regulatory capital requirements, lender risk-sharing, bail-in debt and a potential housing slowdown in Western Provinces (particularly Vancouver).
Bank operations to drive long-term growth
Based on management’s guidance for originations, net interest margin and PCLs, we believe that SCB’s bank operations can generate approximately $0.09 in EPS in 2019, or 44% of non-bank earnings. SCB expects uninsured mortgage originations to grow to about $850-$900 million in 2019, above our previous estimates of ~$600 million.
Blue sky outlook is attractive
Using our current NBF target multiple on three-year forward estimates implies an attractive 52% return from the March 8, 2017 closing price. Using HCG’s peak multiple, a close comparable, the implied return jumps to ~100%.
Price target unchanged, maintain Outperform Our $2.00 (unchanged)
price target implies a target P/E multiple of 8.8x our 2018 adjusted EPS estimates. Given our favourable long-term outlook, we advise investors to increase exposure opportunistically over the course of 2017 and ahead of the robust growth expected in 2018 and 2019.