In a report released Wednesday, analysts at RBC Capital Markets lowered core earnings per share estimates on five major banks by an average of around three per cent. The group of lenders will begin reporting second-quarter results on May 24 with Bank of Montreal and Bank of Nova Scotia .
“Our reduced expectations mostly reflect higher stage two PCLs [provision for credit losses] than we previously assumed, as the macroeconomic outlook has become more uncertain. We also lower our expectations for capital markets,” the report said. Over the longer term, the analysts said that unless a more severe economic downturn occurs, they predict revenue improvement to be “partly offset by normalizing PCLs [provision for credit losses],” which they said would create an approximate five-per-cent growth to core earnings per share on average in 2024. Equity markets for large Canadian banks “remained pressured in the quarter,” the analysts wrote.
As a result, the analysts said they expect weaker quarterly results from BMO, as it likely had to manage “conservatively” during the quarter. with First Horizon Corp. will result in the Canadian bank incurring a US$225 million fee, which will impact the bank’s bottom line.