(October 16 – 17:40 ET) – Merrill Lynch says now is a good time to buy Canadian bank stocks on the heels of recent selloffs.
Canadian banks fell 9% last week while the TSE slipped 1%. TD Bank and CIBC took 12% and 10% hits respectively. Merrill says that at these prices Royal Bank and CIBC are looking like attractive buying opportunities.
U.S. financial corporations begin reporting their third quarter results this week, which should give a good indication of the Canadian results which will be released in the last two weeks of November. Merrill is currently estimating 25% earnings per share growth on 13% revenue growth. Merrill’s U.S. bank analyst team is calling for median EPS growth of 11% in the Money Center banks, 9% for the regional banks, 18% for Fiduciary Banks, 28% for asset managers and 36% for broker-dealers.
Merrill says Canadian bank exposure to junk debt should be less worrying than at U.S. banks. It sees corporate loan and/or junk bond exposure as greater at TD, Scotia and CIBC, with lesser exposure at Royal, National, and BMO. Last week credit concerns at U.S. banks emerged in the financial press, primarily due to underperforming telecom loans.
-IE Staff