Royal Bank of Canada, National Bank of Canada, TD Bank Best Positioned to Navigate Capital Requirements, CIBC Says
07:31 AM EST, 01/15/2024 (MT Newswires) -- Royal Bank of Canada (RY.TO), National Bank of Canada (NA.TO) and Toronto-Dominion Bank (TD.TO) appear best suited to manage their capital needs and maintain high returns, CIBC Capital Markets said.
Analyst Paul Holden said capital management will remain an important theme for Canadian banks in fiscal 2024 and beyond, as the phase-in of Basel III reforms continues through 2026.
"Banks that look best positioned to navigate capital requirements and maintain high returns on equity (ROEs) are the same as the ones that have done it in the past - RY, NA and TD," Holden said in a note to clients.
The analyst said he does not expect OSFI to raised the minimum CET1 requirement in the next 12 months, due to the anticipated slower economy in 2024 and consumer de-leveraging.
"However, we should expect that OSFI increases the minimum CET1 by 50bps at some point in the future given it has room to do so within the existing upper bound of the DSB range (3.5% vs 4.0%)," Holden said.
The analyst said a CET1 of 13.0% for the banks produces an estimated negative 30bps ROE impact for Bank of Montreal (BMO.TO) and Bank of Nova Scotia (BNS.TO), and no impact for RY, NA and TD.