BMO BMO analyst Sohrab Movahedi previewed earnings reports for the major banks, highlighting short-term problems but predicting upside for stock prices once more transparency on the economy arises,
“Across the ‘Big 5′ (excl. BMO) in Q4/23, cash earnings are expected to be down approximately 8 per cent year-over-year (ranging from down 20 per cent at BNS to up 4 per cent at NA), largely reflecting higher year-over-year credit provisions of 38 basis points/$3.2-billion (up from 26bps/$2B) and negative operating leverage (softer revenue coupled with sticky expenses). We are forecasting lower year-over-yearearnings at all operating business segments (led by U.S & Int’l Banking). The Canadian bank index’s forward P/E of 9.2 times relative to our 2024E estimates is now comparable to the averages seen during the pandemic and GFC [great financial crisis]. Bank valuations may remain depressed in the near term, reflecting economic uncertainties; however, we expect a re-rating once investors have greater clarity on the macro and earnings growth beyond FY2024. Our Outperform rated names remain CM, NA, EQB, and CWB”.