Low oil prices and continuing economic malaise are likely to weigh on bank earnings a lot more than expected, causing analysts at Canadian Imperial Bank of Commerce to lessen profit estimates.
“We have bent our earnings estimates lower through our forecast period, with a more pronounced impact later in the year and into (fiscal) 2017,” the analysts, led by Rob Sedran, wrote in a note to clients this week.
“We now forecast development of two per cent and five percent in those years, respectively.”
Toronto-Dominion Bank is forecast to have the highest earnings growth rate both in years, at 3.8 percent and 6.2 per cent.
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National Bank and Royal Bank of Canada are forecast to achieve the lowest growth rates in fiscal 2016, both at less than one percent. However the rate of growth is forecast to increase to three.9 per cent for National Bank in 2017, and 5.2 per cent for Royal Bank, which in fact had the highest rate of growth among the big six banks in 2015, at 8.4 per cent.
The lowest forecast rate of growth for fiscal 2017 belongs to Canadian Imperial Bank of Commerce, at 3.1 percent. CIBC’s earnings grew by 5.7 per cent in 2015 and are forecast to increase by 1.5 per cent in 2016.
The CIBC analysts said the large banks are likely to have greater loan losses in the coming years, however they pricier the pain will be spread equally across the nation.
“We’re not headed for the bomb shelter just yet and still assume this can be a mini credit cycle confined mostly to the oil-exporting provinces,” they wrote.
