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BofA Securities Expects Earnings Beat From Canadian Banks in Q3 Preview

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Canadian banks are entering the third-quarter earnings period up 9% since before the second-quarter, and trading at premium valuations, noted BofA Securities in a report.

"While strong flows and EPS momentum have continued to outweigh valuation concerns, investors will need validation on the macro (potential investment super-cycle, manageable US trade negotiations) and micro (credit stabilization, margin expansion, growth green shoots)," the bank wrote on Aug.2, adding that it expects another quarter of earnings beats from Canadian banks.

BofA Securities believes investors should maintain exposure to what it describes as an "idiosyncratic" Canada story underpinned by a stronger domestic growth outlook under Prime Minister Mark Carney. Canadian banks also remain "well-positioned" to convert that growth into higher returns.

Global investors also seem to believe that Canada is better positioned to execute a growth-oriented policy agenda compared with several Western European economies, it added.

"In this regard, TD Bank (TD.TO) stands out as having the most visible self-help opportunity set, though we see the entire group as well positioned to benefit."

BofA Securities reiterated buy ratings on RBC (RY.TO), National (NA.TO) and CIBC (CM.TO).

Price: $254.01, Change: $+2.54, Percent Change: +1.01%

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