2023-06-02 18:25:58
National Bank’s second quarter missed many of TD Securities’ Mario Mendonca forecasts. (Photo: 123RF)
What to do with National Bank, Laurentian Bank and BRP securities? Here are some analyst recommendations likely to move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.
National Bank (NA, $95.28): TD raises its target, but prefers the potential of other banks
National Bank’s second quarter missed many of TD Securities’ Mario Mendonca forecasts.
Earnings fell 6% to $2.38 per share from a forecast of $2.44. The analyst also reports that the growth of profits before provisions and taxes, the benchmark for the industry, slowed to 3% and joined the average pace of its rivals for three quarters while in 2021 and 2022 the Quebec bank was doing better than them.
Interest margin fell 9 percentage points from the first quarter, compared to other banks’ decline of 0 to 2 percentage points, even excluding the one-time first quarter benefit from the calculation.
Mario Mendonca is more satisfied with cost control, which has kept non-interest expenses from rising to 6%, the lowest in the industry. “The bank has been good at managing inflationary pressures,” he says.
The analyst also appreciates the growth of loans from his Cambodian bank ABA (by 28%) and those of its capital markets division (by 34%) as well as the 50% jump in interest income from the management division. of heritage.
On the other hand, the 25% jump in expenses at ABA reduced the increase in the bank’s profits before provisions and taxes to 1%, despite the 9% increase in revenues. These expenses come from investments in branches and self-service banking centres.
Executives expect strong loan and deposit growth and interest margins to stabilize after a jump in interest paid on deposits in Cambodia.
Total loan loss provisions were flat from the first quarter, but unlike the bank, the TD analyst expects reserves to rise for non-performing loans.
In the end, Mario Mendonca raised his profit forecast by 1 to 2% for 2024, and raised his target from $100 to $105. However, the bank’s breadth of business gives it less of a comparative advantage than in 2021 and 2022 when comparing its outlook to that of other banks, he argues.
In his eyes, ABA’s banking activities in Cambodia and Credigy’s asset financing in the United States do not justify added value for the Quebec bank either.
For 2023 and 2024, Mario Mendonca prefers the potential for growth in profits before provisions and taxes offered by banks that integrate major acquisitions.
The analyst continues to recommend that his clients keep the title of the National Bank, the price of which has lost a good part of the gains made since the beginning of the year.
Dominique Beauchamp
Laurentian Bank (LB, $31.94): Expanding profit margins and controlling costs feel good
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