(May 30 – 17:45 ET) – First Call Corp. says that despite the blowout results from the Canadian banks so far this year, industry analysts are keeping their powder dry and holding their estimates down.
First Call says that the four banks that have reported so far have beaten last year’s results by 30% on average and analyst estimates by 13%. This week Bank of Nova Scotia, Laurentian Bank, and Canadian Imperial Bank of Commerce are slated to report, too. But regardless of the impressive results, analyst estimates have stayed unchanged for the remaining banks and analysts are generally cautious about future results. They say results this quarter have been boosted unusually by strong capital markets activity. In fact one analyst dropped his estimate on Royal Bank by 5¢ after its blowout quarter.
First Call also notes that both the market and analysts are generally ranking the banks by market cap. In other words the largest, TD Bank, is rated highest by analysts and valued most by the market. The exception is CIBC which has the highest consensus recommendation, despite having only the fifth-highest market capitalization.
Although the analysts aren’t jumping on the bandwagon, First Call says the outlook for the banks remains positive for the rest of the year. “The Canadian economy continues to chug along at a robust pace. The biggest potential pitfall remains, as is the case south of the border, the interest rate environment. A continued series of interest rate hikes could significantly pressure bank earnings and lead slower earnings growth in the second half.”
-James Langton