Toronto-Dominion Bank T.TD

Scotiabank

[retiredcf]

I don’t remember a Canadian bank analyst ever including the phrase “how low can they go?” in a research report, but Scotiabank’s Meny Grauman achieved the feat in How Low Can You Go? Doing the Bank Stock Limbo,

“OUR TAKE: Negative. Canadian bank stocks headed into Q3 earnings season already reflecting low expectations with downward revisions to consensus EPS expectations, and the shares trading at just 9.4 times F2024 consensus earnings. And yet the group as a whole was not able to jump over that low bar, as RY was the lone Big Six bank to beat the Street, and on average EPS estimates continued to head lower (albeit modestly) coming out of reporting season. Although Canadian Bank stocks are already pricing in a mild recession, the group cannot seem to gain momentum as the rate outlook remains highly uncertain. The BoC did leave rates unchanged at its most recent policy meeting last week, but August’s better-than-expected jobs report continued to highlight the upside risks. The clear message from the banks this earnings season was that the operating environment remains challenging as slowing revenue growth puts a big spotlight on expense management. At the same time ROEs are likely to continue to be pressured by still rising capital requirements. BMO remains our favourite name in the space thanks in large part to coming synergies, while TD is our second favourite name thanks to a peer-leading CET1 [regulatory capital] ratio”