CIBC analysts reduce bank growth forecasts as oil, economy drag

Low oil prices and recurring economic malaise are going to weigh on bank earnings more than expected, causing analysts at Canadian Imperial Bank of Commerce to reduce profit estimates.

“We have bent our earnings estimates lower through our forecast period, having a more pronounced impact later in the year and into (fiscal) 2017,” the analysts, led by Rob Sedran, wrote in a note to clients this week.

“We now forecast development of two per cent and five percent in those years, respectively.”

Toronto-Dominion Bank is forecast to have the highest earnings growth rate in both years, at 3.8 percent and 6.2 per cent.

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National Bank and Royal Bank of Canada are forecast to achieve the lowest growth rates in fiscal 2016, both below one percent. However the growth rate is forecast to rise to three.9 percent for National Bank in 2017, and 5.2 per cent for Royal Bank, which in fact had the greatest growth rate among the big six banks in 2015, at 8.4 per cent.

The lowest forecast growth rate for fiscal 2017 is associated with Canadian Imperial Bank of Commerce, at 3.1 per cent. CIBC’s earnings grew by 5.7 percent in 2015 and therefore are forecast to rise by 1.5 percent in 2016.

The CIBC analysts said the large banks are likely to have greater loan losses within the coming years, however they pricier the pain will be spread equally across the nation.

“We’re not headed for the bomb shelter just yet and still assume this can be a mini credit cycle confined mostly towards the oil-exporting provinces,” they wrote.