Scotiabank Scotiabank analyst Meny Grauman thinks it’s too early to get bullish on Canadian banks,
“As we leave Q2 reporting our key message to investors is that despite better-than-expected underlying consumer credit metrics, better-than-expected jobs numbers (in the U.S.), and material downward revisions to EPS estimates this earnings season it still too early to get positive on the banks. The reality is that this credit cycle is still in the early innings/first period/first quarter – whatever your favorite sports analogy it is still not the time to go overweight the sector. With consensus sector EPS estimates falling 3 per cent in F23 and 2 per cent in F24 over earnings season, it really is loan loss provisions that will take bank earnings estimates lower from here. For anyone who is comfortable with a soft-landing scenario the Canadian banks do present a very good buying opportunity, but we believe that credit risk is elevated, especially with rates expectations continuing to climb. As a result we reiterate our sector call of lifecos over banks, and within banks we highlight defense, with TD at top of list given its fortress balance sheet.”