‘The party’s still not over’ for Canadian bank stocks, says Scotia analyst

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

Scotiabank bank analyst Mike Rizvanovic’s report on bank earnings was called The Party’s Still Not Over,

“We came into Q3 earnings cautious about the near-term outlook for the banks following the strong run-up in their share prices in recent months and were doubtful that results would drive forward earnings expectations higher. Clearly, our caution was unwarranted as the large banks once again showed their resilience even in the face of ongoing macroeconomic uncertainty. The quarter featured a sizable EPS beat almost across-the-board, driven by top-line strength (NIMs and fee-based revenue), while credit losses were well-contained with the outlook for PCLs sounding a bit more constructive. Capital remained a tailwind with CET 1 ratios solid and several of the banks upping their commitments on share repurchases. We have not made any rating changes post-Q3, although following yet another clean, strong quarterly result, CM is now our top pick among the large banks, followed by RY, NA (both also SO-rated), BMO, and TD. Among the smaller banks that we cover, we prefer LB over EQB, with the latter having seen F2026 EPS consensus fall by 11 per cent following a sizable EPS miss that was broad-based. Within our coverage universe overall we now have a slight preference for the large Canadian banks over the large Canadian lifecos”

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BMO bank analyst Sohrab Movahedi also summarized earnings for the sector and reiterated top picks,

“The ‘Big 6′ collectively delivered $17.0-billion in earnings in Q3/25 an increase of approximately 14 per cent year-over-year ($47.8-billion year-to-date; up 11 per cent year-over-year) . Five of the six beat consensus expectations in Q3, most by RY (up 16 per cent); NA was the sole miss to consensus (down 1 per cent) although it was a minor beat to us (up 2 per cent). The beats were primarily revenue-driven, and every bank delivered positive operating leverage. Notwithstanding a cautious credit narrative around trade[1]related uncertainties, we expect PCLs [provisions for credit losses] next year to be lower. With strong balance sheets (capital and reserve levels), active buybacks, and double-digit PTPP [pre-tax, pre-provision] growth we have increased confidence in our earnings forecast (especially at CM and RY where we increased our target prices). The Canadian bank index total return of 22-per-cent calendar year-to-date is 460 basis points above the S&P/TSX. No change to our Outperform ratings on CM, RY, TD, NA”.

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Macquarie global strategist Viktor Shvets offers a theory on why investors are not panicking more about the U.S. political situation and transformational technology,

“An abundance of capital (at least 6x GDP) explains some of the disconnect and the inability to price risk. 2. Despite evidence that most guardrails collapsed, investors hold-out hope that whether TACO or WWE, changes will prove performative and will not alter the status quo. Ditto for other challenges (e.g. turbulence in the UK’s or France’s bond markets, China’s struggle with deflation or Russia-Ukraine). 3. Finally, investors assume that AI to AGI [artificial general intelligence] progression will improve productivity without much disruption. Where do we stand? While abundant capital offers support, a return to the status-quo is neither possible nor likely, with populist policies magnifying risks. Also, AI-AGI promises to be a violent highly disruptive transition. We thus maintain our mantra: “more things change, the less we do”, with emphasis not on conventional theories but on revolutionary forces re-shaping the world (Thematics & QSG portfolios): an environment of no economic or capital market cycles, no mean-reversion, no one is special”

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Bluesky post of the day:

Diversion: “Scientists Have Figured Which Types of People Are Successfully Hooking Up the Most on Tinder” – Futurism