Stephanie Hughes, Bloomberg NewsGerard Cassidy, managing director and head of U.S. bank equity strategy at RBC Capital Markets, joins BNN Bloomberg and talks about finding opportunities in the U.S. bank stocks.
CIBC said it upgraded Bank of Nova Scotia to an outperformer rating and demoted National Bank of Canada to neutral as borrowing costs ease and fading economic risks mean banks don’t have to set as much money aside for bad loans. That gives Scotiabank an opportunity to catch up to National Bank, with analyst Paul Holden saying valuation spreads are still wide.
Holden said the switch trade would work particularly well if expectations for provisions for credit losses — the amount banks set aside for loans potentially going sour — start to come down since discounted banks tend to post the highest ratios. The team also noted that Toronto-Dominion Bank is trading at a 7% discount to the group. They expect that gap to narrow once anti-money laundering issues in the US are settled by the end of the year.