Capital market slowdowns are expected to have a big impact
Canada’s largest banks are likely to see their latest earnings reports impacted by an anticipated slowdown in capital markets and merger/acquisition revenues, according to Royal Bank of Canada (RBC) analyst Darko Mihelic.
With the Big Six banks projected to start reporting their fiscal Q3 results on August 24, Mihelic is anticipating core earnings per share for the quarter to fall by an average of 7% across the board.
“In the quarter, we expect capital markets revenues to be pressured, credit losses to continue to normalize, and the average core all-bank NIM [net interest margin] to slightly expand quarter-over-quarter for the large Canadian banks under our coverage,” Mihelic said, as reported by The Globe and Mail.
“We forecast the average core EPS for the large Canadian banks under our coverage to increase 2% quarter over quarter but decline 6% year over year in Q3.”
The Q2 financial results announced by Canada’s top banks last week reflected a highly uncertain economic environment, with provisions for credit losses surging as four of the top five banks missed analyst estimates.https://t.co/xBTG0ogzRu#mortgagenews #economy
— Canadian Mortgage Professional Magazine (@CMPmagazine) June 1, 2023
Bank results will reflect weaker dollar value in transactions
Based on Bloomberg data, Mihelic projected that the dollar value of mergers and acquisitions involving the Big Six likely plummeted by 77% in the fiscal third quarter compared to a year ago.
Other factors that are likely to affect this month’s reports include volatility in the corporate and wealth management sectors, Mihelic said.
“We expect capital markets revenues to decrease 9% year over year for the large Canadian banks under our coverage,” Mihelic said. “The top five US capital markets banks experienced a 10% year-over-year decrease in revenues in Q2, and we reflect a similar decline for the large Canadian banks under our coverage.”
