I don’t remember a Canadian bank analyst ever including the phrase “how low can they go?” in a research report, but Scotiabank’s Meny Grauman achieved the feat in“OUR TAKE: Negative. Canadian bank stocks headed into Q3 earnings season already reflecting low expectations with downward revisions to consensus EPS expectations, and the shares trading at just 9.4 times F2024 consensus earnings.
“We view this year as an extension of the late cycle period often experienced when the Fed is expected to pause or reverse its hawkish policy stance. As is typical in such periods, multiple expansion has moved ahead of where macro fundamentals dictate fair value to be, placing the burden on a growth reacceleration and/or incremental policy support that’s not already in the price in order to keep multiples elevated … Late cycle/more conservative factors are outperforming once again.
“Our Global Indicators Chartbook shows manufacturing sectors continuing to struggle while services sectors are losing momentum. The global manufacturing PMI ticked up slightly in August but is still contractionary, as it has been since September 2022. Softness in goods demand is also reflected in a range of other indicators including tepid retail sales volumes, industrial production, and global trade.