(August 2 – 09:20 ET) – Canadian banks began their fourth quarter today, but analysts are gearing up for third quarter reporting season, expected in mid- to late-August.
Merrill Lynch Canada says, “our guess is that there may be some upward revisions”. It expects improved earnings expectations because capital markets may not have been as bad for the banks as some expect. As well, strong M&A activity will make up for weak investment banking business, and the full-service retail business is not as bad as originally feared. Apart from the capital markets, Merrill is expecting decent loan loss performance and better-than-expected cost-cutting from the banks.
The discount brokerage business is one area that has suffered acutely from the market slowdown, with volumes down around 40%. Merrill is expecting TD Waterhouse to deliver earnings that are just half what it posted in the previous quarter. It notes that in the U.S. rivals Schwab and E*Trade managed to cushion the blow by cutting advertising spending, but that’s not likely at TD, which is a comparatively frugal advertiser already. On the upside for TD Waterhouse, Merrill views its recently announced European discount brokerage as a positive move.
-IE Staff