CIBC Capital Markets Analyst, Paul Holden, navigates the upcoming earnings previews of Canada’s ‘Big 6’ banks’ and shines light on what to expect in 2023 and beyond.

Whether it be through the Canada Pension Plan, private pensions or individual investment programs, it is safe to say that a majority of Canadians are invested in the domestic banks.  We therefore thought it important to issue the attached report (to open the report, click here) from our analyst, Paul Holden, as he ponders a possible inflection point for corporate performance and share prices.  A long-term commitment to banks has proven to be both profitable and, in times of difficult economic cycles, prudent.  Also, rising dividends have positively contributed to the need for cash flow for many Canadian investors.

With this report, Paul Holden provides a handy guide to when the banks report their second quarter results.  But he maintains that the outlook for 2023 should be uppermost in investors’ minds, based on his concerns over the following (we include a glossary of terms used in this report, along with the stock symbols for the banks):

• Potentially higher PCL ratios in 2023
• The possibility of slowing loan growth
• Some strain on wealth management fees
• CET1 ratios and ROEs, both a good measure of quality
• Bank stocks, at 1.7X P/BV, reflect the long-term average; not expensive, but not cheap

Given that bank stocks, and stocks in general, are quite efficient at discounting future events, the drop in their prices by an average of 14.7% from their recent highs, reflect, in part, those concerns listed above.  We are generally underweight bank stocks in client accounts versus the index, but would look for any major weakness to bolster that position over the next 12 to 24 months. 

Bank stock symbols

BMO: Bank of Montreal

BNS: Bank of Nova Scotia

CM: CIBC

NA: National Bank

RY: Royal Bank

TD: Toronto-Dominion Bank

Glossary of terms