Scotiabank analyst provides profit forecast and top picks in bank sector

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Banks

Scotiabank bank analyst Mike Rizvanovic sees growing earnings power at the big five,

“Earnings in Q4-F25 for the large banks came in comfortably above expectations by an average of 7 per cent with an across-the-board EPS beat. Share prices have rallied by 4 per cent since the beginning of earnings season, led by RY (up 6 per cent), CM (up 5 per cent), and BNS (up 4 per cent), and BMO trailing with a more modest 1-per-cent increase. The movement in share prices has modestly outpaced the increase in EPS consensus for F2027, which is up an average of 2.4 per cent (CM was at the top end with up 3.8 per cent and BNS trailed at up 0.4 per cent), driving very modest multiple expansion as the group now trades at a market cap-weighted forward P/E multiple of 12.3 times … The Capital Markets business was by far the largest driver of the EPS beat for the large banks in the quarter among the operating segments, driven mostly by strong trading revenue, which was flat for the group overall sequentially and did not moderate as we had expected (we were looking for an 11-per-cent decline). US exposure within the business was particularly strong, a growing area of focus for incremental capital deployment … Our relative ranking now has NA as our top pick where we see the most compelling upside potential over the medium-term, followed by CM, which continues to show very good execution, RY, which had a sizable EPS beat in Q4, TD, and BMO. We continue to prefer the Canadian banks over the Canadian lifecos”

Mortgages

BMO senior economist Robert Kavcic report on domestic mortgage rates,

“The recent run of better Canadian economic data and sticky inflation has not only scrubbed out any chance of another near-term Bank of Canada rate cut, but has also led the market to build in a chance of rate hikes in the second half of 2026. This has been felt in longer-term yields, with the 5-year yield now up almost 40 bps since the start of November, to above 3 per cent. A steeper yield curve, with longer yields rising, is also probably going to nudge up 3- and 5-year fixed mortgage rates if it sticks, reversing some of the downward momentum seen in recent years. Some takeaways for the mortgage market heading into 2026: -Current rates are very ‘neutral’ from a longer-term perspective, so get used to it. -A steeper curve will probably keep fixed rates above variable into the spring selling season. -We don’t see the Bank of Canada raising rates in the near future, which will leave variable as the cheapest option heading into the spring”

“BMO: “Eye on interest rates”” – (chart, text) Bluesky

Mining

RBC mining and materials analysts forecasting higher gold and copper prices,

“We forecast new highs will be achieved again for gold in 2026. We increase our gold forecasts in 2026 to $4,600/oz (up 17 per cent vs. prior), our 2027 to $5,100/oz (up 24 per cent vs. prior), and long-term to $3,000/oz (up 15 per cent vs. prior). We maintain a positive outlook for gold equities; however, we see some upcoming interim headwinds into 1Q guidance season. Our preferred precious metals equities include; Large caps: AngloGold, Gold Fields. Royalties: Royal Gold, OR Royalties. Mid-caps: G Mining, Torex, Iamgold, Equinox, Eldorado, Artemis. ... We expect copper prices to strengthen into 2026 as supply remains constrained while demand holds firm: We have increased our 2026 copper forecast to $5.25/lb (up 17 per cent vs. prior). We maintain our 2027-2029 forecast at $5.00/lb and have raised our long-term price from 2030 onwards to $5.00/lb (up 25 per cent vs. prior). We see potential for continued momentum in the equities, our preferred copper equities include Capstone, Hudbay, and First Quantum … Uranium views unchanged, long-term outlook positive. We see growing uranium demand with significant nuclear capacity expansion while we think the corresponding supply response could be challenged. We currently forecast spot prices at $80/lb in 2026 and $85/lb in 2027, with term prices rising to $90/lb in 2026 and $95/lb in 2027. We hold long-term price of $100/lb post post-2035 to incentivize new production (details here for our uranium S&D deep dive, and here for our AP1000 deep dive). Our preferred uranium equities include Cameco and Nexgen Energy”

Bluesky post of the day

Diversion

“Our Favorite Science Books to Gift This Year” – Gizmodo