RBC Bank Analyst Darko Mihelic Forecasts Q3 Earnings for Canadian Banks, Lists Top Picks

RBC bank analyst Darko Mihelic previews earnings reports for the sector and presents top picks, with outperform weightings on Bank of Montreal, Canadian Imperial Bank of Commerce, and EQB Inc. He expects approximately 6% year-over-year growth and a healthy 6% quarter-over-quarter increase in core EPS for large Canadian banks. Mihelic also notes that credit quality appears stable, but GDP growth, unemployment, and housing market trends may pose soft spots. BMO chief economist Doug Porter believes AI won't be a productivity boost equal to the internet, while Wells Fargo strategist Austin Pickle has downgraded commodities from overweight to neutral.

Canadian banks are set to release their second-quarter earnings reports, with RBC bank analyst Darko Mihelic providing a preview of the sector. Mihelic expects approximately 6% year-over-year growth and a healthy 6% quarter-over-quarter increase in core EPS for large Canadian banks, while noting that credit quality remains stable [1].

Mihelic's top picks include Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC), and EQB Inc., with outperform weightings. However, he also identifies potential soft spots, such as GDP growth, unemployment, and housing market trends.

BMO chief economist Doug Porter believes that while AI may offer some productivity gains, it is unlikely to match the transformative impact of the internet. Wells Fargo strategist Austin Pickle has downgraded commodities from overweight to neutral, reflecting a more cautious stance on the sector.

RBC Capital Markets analyst Logan Reich saw Restaurant Brands International Inc.'s (QSR-N, QSR-T) second-quarter report as "mixed," with a difficult macroeconomic backdrop threatening to further weigh on the parent company of Tim Hortons and Burger King [2]. Despite positive elements like Tim Hortons' strong top-line beat and improving trends in China, concerns over a slowing U.S. consumer and intense competition in Burger King's U.S. operations led to a downgrade in the stock's target price.

National Bank Financial analyst Gabriel Dechaine downgraded Sun Life Financial Inc. (SLF-T) to "sector perform" due to deteriorating earnings visibility and operating challenges, primarily in the U.S. segment [3]. The analyst noted negative policyholder experience and credit losses, particularly in the Dental line, which led to a retraction of the 2025 Dental profit target.

Canadian Tire Corp. Ltd. (CTC.A-T) reported resilient consumer spending in the second quarter, but its results were offset by heightened investments, leading to a 10.6% plunge in shares [4]. Analysts, including Vishal Shreedhar from National Bank Financial, cut their EPS estimates and target prices for the company, citing ongoing disruption related to the True North strategy.

References:
[1] https://www.theglobeandmail.com/investing/markets/inside-the-market/article-fridays-analyst-upgrades-and-downgrades-263/
[2] https://www.theglobeandmail.com/investing/markets/inside-the-market/article-fridays-analyst-upgrades-and-downgrades-263/
[3] https://www.theglobeandmail.com/investing/markets/inside-the-market/article-fridays-analyst-upgrades-and-downgrades-263/
[4] https://www.theglobeandmail.com/investing/markets/inside-the-market/article-fridays-analyst-upgrades-and-downgrades-263/