NTIOF - KBW expects tough Q2 for Canadian banks downgrades National Bank of Canada

2023-05-17 11:36:28 ET

As Canadian banks kick off the Q2 earnings season next week, Keefe, Bruyette & Woods expects a tough quarter amid multiple headwinds and downgraded National Bank of Canada ( OTCPK:NTIOF ) to Market Perform from Outperform.

Q2 is expected to be challenging for Canadian banks due to "downward pressure on net interest margins (at least in the near-term), higher provisions for credit losses to reflect rising insolvencies and some potential reserve build, more loan growth deceleration, and rising expenses," said analyst Mike Rizvanovic.

He remains cautious on the group given the above factors and a lack of meaningful catalysts, and sees downside risk to consensus earnings estimates through FY24.

Rizvanovic's downgrade of National Bank of Canada ( OTCPK:NTIOF ) is based on its outsized valuation premium, which limits relative upside."We see a less favorable earnings growth trajectory for NTIOF through FY24 vs. most peers due to intensifying competition in Quebec, outsized exposure to Capital Markets, which could remain weak through next year, and further growth moderation in U.S. Specialty Finance and International."

Wall Street analysts as well as SA Quant rate National Bank of Canada ( OTCPK:NTIOF ) a Buy.

Now read - National Bank of Canada: NII Remains Under Pressure

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