LRCDF - Barclays cuts view on Canadian banks to Neutral; Royal Bank cut to Underweight
2023-05-09 08:26:27 ET
Barclays shifted to a Neutral outlook from Positive on Canadian banks as analyst John Aiken expects some cracks to start to appear when they report Q2 earnings. Overall, he doesn't expect the results to show much in the way of weakness.
"Further, with an uncertain outlook and a looming recession, we anticipate that there will continue to be pressure on the banks' valuations and declining confidence in their earnings outlook," Aiken wrote in a note to clients.
The analyst downgraded Royal Bank of Canada ( RY ) to Underweight from Overweight, Bank of Nova Scotia ( BNS ) to Underweight from Equal Weight and TD Bank Group ( TD ) to Equal Weight from Overweight.
The Underweight rating on Royal Bank of Canada ( RY ) reflects qualms Aiken has on the stock's valuation. RY is trading at lamost two multiples ahead of its peer average and almost one multiple head of its next closest peer, he said.
Looking at Canadian banks Q2 earnings: "Amidst modest, albeit positive loan growth, higher rates continue to be supportive of net interest margins, but a shortened Q2 could weigh on net interest income though it could also see net interest expense ebb," the analyst said.
He keeps a Overweight ratings on Bank of Montreal ( BMO ) and Canadian Western Bank ( OTCPK:CBWBF ), Equal Weight ratings on Canadian Imperial Bank of Commerce ( CM ) and Laurentian Bank ( OTCPK:LRCDF ) and Underweight rating on National Bank of Canada ( OTCPK:NTIOF ).
Aiken's Underweight rating on Royal Bank is more bearish than the SA Quant rating of Hold ; and his Neutral rating on TD Bank ( TD ) contrasts with the Quant rating of Buy . See key stats for RY and some of its peers here.
For more on Canadian Banks:
- Royal Bank of Canada: Plummeting Home Prices Could Trigger Mortgage Default Risk Event
- Toronto-Dominion Bank and First Horizon: The Cancellation Is Bullish
- Anti-money-laundering practices may be behind First Horizon/TD deal break
For further details see:
Barclays cuts view on Canadian banks to Neutral; Royal Bank cut to Underweight