BMO BMO bank analyst Sohrab Movahedi sees a good chance Canadian banks will outperform the benchmark in the second half of the year,
“In the first half of calendar 2024, the Canadian bank index has delivered a positive total return of ~0.5%, underperforming the S&P/TSX composite by ~5.5%. In our view, this slow start to the year is driven by continued investor caution around the macroeconomic environment and its implications for earnings recovery prospects for the Canadian banks given still elevated credit costs and sluggish loan growth. Still, there is room for optimism; based on historical observations, the probability for the bank index to outperform the composite in full year calendar 2024 given the slow start to the year is ~50%. Following Q2/24 results, we reiterate our view that the Canadian banks are at an earnings inflection point, which should support higher valuation multiples and ultimately share price performance over our forecast period. We continue to rate CM, RY, NA and EQB Outperform”