Post by
retiredcf on Nov 17, 2022 9:23am
BofA Analysis
BofA Securities analyst Ebrahim Poonawala published a report on Canadian banks entitled Feeling the Pain on Thursday,
“We expect the economic pain from higher interest rates to surface in 4Q22 and 2023 outlooks. We believe the immediate casualty is likely to be mortgage loan growth, we forecast +0.7% quarter-over-quarter for 4Q22 vs. +2.4% in 3Q22, with potential for a more broad-based slowdown in 2023. Our estimates also reflect a gradual build-up in performing PCLs (credit costs), reflecting the deterioration in the macro-outlook. BofA Economics forecast calls for Canada/US 2023 GDP growth of 0.8%/-0.4% YoY, a worsening vs. 1.8%/-0.1% forecast three months ago. BofAe EPS: -4% in median YoY growth for 4Q22 (vs. -3% reported for 3Q22) and +3% for FY23 (vs. +3% for FY22). Valuations: Stocks trading at 9.7x 2023 P/E vs 11.0x median over 5yrs pre-pandemic … TD Bank-TD, and RBC-RY to lead the pack in terms of continued boost to their net interest margins from higher interest rates … While the EPS boost from higher rates is well known for TD, the potential for a beat on margin expectations sets up the stock attractively. TD trading at 10.2x P/E vs. 9.7x peer median and 11.5x for RY (note RY has seen a bump in short interest recently). BNS appears “washed-out” at 1.3x P/Book and 8.4x P/E. Inline results could be enough to drive a positive stock reaction”
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