Canadian banks to provide financial update in Q4 results ahead of possible recession
Provisions on potentially bad loans will be another differentiator, especially since complex accounting rules make the measures an ongoing source of variable versus analyst consensus, said Scotiabank analyst Meny Grauman in a note.The financial buffers started creeping up last quarter after an extended stretch of banks winding down what they built up during the early part of the pandemic.
“The bottom line is that those looking for proof of a recession in this latest batch of bank results will be sorely disappointed once again.”He pointed to the latest jobs report that showed a big bounce back in employment after a summer lull, and a surge in wage growth, as a big support for the economy and bank performance.
Given this is the last quarter of the year, analysts will also be pushing to see how banks see these key trends performing next year, said RBC analyst Darko Mihelic in a note. “Being year-end, it is usually a good time to press for guidance. Are we at or near peak net interest margins and peak loan growth? How high do provisions for credit losses go from here?”He said earnings per share will likely dip slightly from the third quarter but be up a year earlier, with strong loan growth from last year despite the dip in mortgages as commercial loans have remained strong. For next year, Mihelic said he’s conservatively expecting earnings per share growth of 2.
“We do not expect any talk of HSBC on the quarterly calls, but it is the elephant in the room and certainly has capital implications for the winner,” said Grauman.This report by The Canadian Press was first published Nov. 27, 2022.
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