At least two analysts have revised their earnings expectations for the fourth quarter, pointing to volatile markets, the need to set more money aside for bad loans and and increasing funding costs among other headwinds.By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails. Postmedia Network Inc.
“The biggest drivers are lower capital markets revenue, less wealth management revenue and higher operating expenses,” Holden wrote in a Nov. 18 note, adding that the two dominant themes for the quarter would be net interest margin expansions and higher credit provisioning. “Overall, our adjusted estimates imply earnings will be down two per cent and on average.”Article content
Expanding net interest margins, or the spread a bank earns between interest income and interest expenses, has been a leading theme for the banks this year as theengaged in an aggressive rate hiking cycle that brought the policy rate from near-zero to 3.75 per cent in October. The hikes created a trade-off in that while they dampened demand for loans, they also increased the amount of interest the banks can charge as they moved their prime rates up in tandem with each central bank hike.
CIBC analysts expect expanding net interest margins to remain as the banks’ primary drivers, benefitting Toronto-Dominion bank and the Royal Bank of Canada the most since they would have the best operating leverage.Article content Scott Chan, an analyst at Canaccord Genuity, and his also revised adjusted earning estimates down three per cent, pointing to growing macroeconomic concerns for dragging on bank stocks this year.