“Generally speaking, there are more headwinds for banks and uncertainty in the near term than there are tailwinds,” he said. “Overall, we think we’re closer to the floor for the sector than we are to the ceiling … in terms of their prices.”
“As we are entering into a potential economic slowdown, we are cautious on their near-term valuations, despite being below historical norms,” Aiken said in an email. “As credit losses begin to accumulate, we are concerned that there will be dual pressures of downward earnings expectations and lower valuation multiples applied to their valuations.”Canada entering a recession
In bolstering loan-loss provisions and hiking dividends, the banks are showing regulators that they are gearing up for a possible recession to protect against future losses, he said. But one upside is that revenue losses and “actual” impairments on loans haven’t materialized yet.