Keefe, Bruyette & Woods Turns Sour On Canadian Banks, Downgrades Sector To Underweight

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In a report published Thursday, Keefe, Bruyette & Woods analyst Brian Klock moved his long-term recommendation for the Canadian banking sector to Underweight from Market Weight. "We believe the outlook for muted Canadian economic growth in the first half of 2015 (which is through fiscal 3Q15 for the banks), when combined with the pressure from a lower yield curve, could weigh on top-line growth," Klock wrote. "Also, the impact from a weaker Energy sector could also reduce earnings growth for the banks this year." Klock noted that the impact from a weaker Energy sector could also reduce earnings growth for the banks. The analyst also added that consensus estimates for the banks are too high and shares will be pressure during the year as the Street revises its estimates lower.
Rating Changes Klock issued the following changes on TSX-listed Canadian banks:
  • Shares of Bank of Montreal BMO were maintained at Market Perform with a price target lowered to C$80 from a previous C$86.
  • Shares of Bank of Nova Scotia BNS were maintained at Market Perform with a price target lowered to C$67 from a previous C$71.
  • Shares of Toronto-Dominion Bank TD were maintained at Market Perform with a price target lowered to C$56 from a previous C$58.
  • Shares of Canadian Imperial Bank of Commerce CM were downgraded to Underperform from Market Perform with a price target lowered to C$92 from a previous $108.
  • Shares of Royal Bank of Canada RY were downgraded to Underperform from Market Perform with a price target lowered to C$74 from a previous C$85.
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Posted In: Analyst ColorDowngradesAnalyst RatingsBank of MontrealBank of Nova ScotiaBrian KlockCanadian banksCanadian Imperial Bank of CommerceKeefe Bruyette and WoodsRoyal Bank of CanadaToronto-Dominion Banktsx
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