The Outlook for Canadian Banks is Looking Dim, says Scotiabank Analyst

According to Scotiabank analyst Meny Grauman, the outlook for Canadian banks is not very promising. Given regulatory and macro headwinds, he believes the recent rally in bank stocks has been too fast and gone too far. The recommendation for investors is to favor life cos over banks. Although all the banks beat street expectations, the outlook appears to be more challenging in the coming quarters. Going into Q2, a tougher quarter is expected due to a combination of factors, including fewer interest-earning days, slower loan growth, and higher PCL ratios. BMO remains the top pick in the space, with TD as the second-favorite name.

Bank of Canada Pauses Rate Hike, while Federal Reserve Prepares for More Rate Hikes

Morgan Stanley’s chief economist sees rate hikes for the Federal Reserve while expecting the Bank of Canada to hold rates constant at its March meeting for the remainder of 2023. The trajectory of inflation and inflationary pressures will be key for the April meeting, where the Bank will provide updated economic forecasts. The US team expects the Fed to deliver 25bp hikes at both March and May meetings, bringing the peak policy rate from 5.00% to 5.25%. However, they see the Fed delivering the first rate cut in March 2024, and cutting rates at a slower pace of one 25bp cut each quarter, bringing the federal funds rate to 4.25% by the end of 2024.

Global Gasoline Prices are Set to Rise, says BofA Securities Commodity Strategist

BofA Securities commodity strategist Warren Russell predicts a bullish outlook for gasoline prices. Gasoline prices have begun a meteoric rise due to supply chain disruptions, increased demand, and reduced refinery capacity, resulting in a bullish outlook for gasoline prices. Unfortunately, this means consumers may need to start getting bearish on driving.

Related Facts

• Bank of Canada held rates constant at 4.25% in March 2022.
• BMO has completed the acquisition of Bank of the West, which is expected to contribute US$2 BB in incremental PTPP earnings by the end of 2025.
• Global gasoline prices are expected to rise by 10-30% during 2022.

Key Takeaway

The outlook for Canadian banks remains uncertain, with a challenging Q2 ahead. The Bank of Canada is expected to maintain its current interest rate policy while the Federal Reserve prepares for more rate hikes. Meanwhile, gasoline prices are expected to rise, signaling a potential bearish outlook on driving.

Conclusion

The market constantly changes, and investors must stay up-to-date with the latest research and analysis to make informed decisions. The outlook for Canadian banks is not very positive, while gasoline prices are set to rise. It is important to watch these developments to make wise investment choices.