Canada\u0027s banks begin reporting earnings this week but analysts are divided on how they will do. Find out more
“With consensus estimates lowered coming out of Q2 , we believe the banks could surprise to the upside, posting better than expected third-quarter earnings and continuing to fuel valuations ahead of the long-awaited … but now only potential recession,” the analyst wrote in an Aug. 21 note to clients.
Capital markets activity has been slow in the first half of 2023 amid concerns about recession, tightening credit, labour shortages, inflation and a continuation of elevated or even rising interest rates. But Aiken said the banks’ capital markets divisions could prove to be the quarter’s “X-factor.” Gabriel Dechaine, who tracks the sector for National Bank of Canada, said the third quarter will invariably be an improvement over the second quarter, but is less enthusiastic about the potential for a rebound.
Dechaine also expects another expensive quarter after the surprise cost growth in the low teens in the second quarter, noting that Canadian banks as a group have been logging higher expenses than their U.S. counterparts, which have seen outlays rise at a rate of approximately five per cent.
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