Bank earnings season is here. Expect more profits, no dividend hikes

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Analysts expect that the Big Six will show that profits rose 5 per cent from the same quarter in 2021, and relatively unchanged from the previous quarter, based on consensus expectations

If that looks disappointing, it’s because the forecast implies a considerably slower pace of growth than last year, when the economic recovery and subsiding loan losses sent profits surging 50 per cent above beaten-down 2020 levels.

Another reason to cool your enthusiasm for the latest results: Bank stocks have surged 38 per cent over the past 12 months. The rally has raised the price-to-earning ratios for the sector to 11.7-times estimated earnings over the next 12 months. That is slightly above the historical average P/E of 11, according to Scott Chan, an analyst at Canaccord Genuity.

“Although Omicron concerns and the return of some containment measures in January did reduce travel and restaurant spending, spending remained 10 per cent above pre-COVID levels in January,” Mr. Mihelic said in a note. “It is well understood that TD has the most earnings sensitivity to rising rates, but with the stock trading at the widest premium to the group it is already getting a lot of credit for that,” Meny Grauman, an analyst at Bank of Nova Scotia, said in a note.

 

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