Canada bank earnings to take hit from capital markets, M&A slump, RBC says - BNN Bloomberg

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Slumping capital markets and M&A revenues are set to hit earnings at Canada’s biggest banks when they report this month, according to Royal Bank of Canada.

RBC analyst Darko Mihelic chopped his profit forecast on five major Canadian lenders, citing a dearth of deals. The dollar value of mergers and acquisitions handled by the country’s largest banks likely dropped 77 per cent in the fiscal third quarter compared with a year ago, Mihelic calculated, based on data compiled by Bloomberg.

Overall earnings may slip 6 per cent in the quarter, with Bank of Nova Scotia and Canadian Imperial Bank of Commerce to suffer the biggest projected declines, Mihelic wrote. The analyst doesn’t provide estimates for his own bank. The banks begin reporting near the end of August. Mihelic lowered his forecasts for capital markets revenue based on the results of major US banks that reported second-quarter results last month.

Toronto-Dominion may do better than its peers, helped by the integration of Cowen Inc. TD’s capital markets unit may see a 6.3 per cent drop in capital markets revenue compared with 10 per cent for other banks, compared with a year ago, Mihelic said in an Aug. 8 note to investors.

 

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