What to do with National Bank and CIBC stocks? Recommendations and analysis on recent financial results

2023-09-01 20:11:25

The 27% drop in National Bank’s profit on the financial markets has drawn particular attention. (Photo: 123RF)

What to do with National Bank, CIBC and MTY Food Group securities? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.

National Bank (NA, $94.17): the title suffers after the results

Difficult week for the National Bank (BN) after the announcement on Wednesday of its results for the third quarter of 2023 which missed the main targets of analysts who follow its activities.

First, its net profit of $790 million represents a drop of 4% compared to the same period last year, which was more like $826 million. That represents adjusted earnings per share of $2.21, well below the $2.37 analysts had expected. Doug Young of Desjardins was expecting a profit of $2.38 per share.

The 27% drop in profit on the financial markets caught the eye. From $279M in the third quarter of 2022, it fell to $205M, a drop of 27%. Analyst consensus was $258m.

“In financial markets, net income before provisions and before taxes was 22% below our expectations due to lower trading volumes and market volatility,” said Doug Young. “However, he continues, the management of the Bank expects a normalization in this sector.”

In addition, analysts point out, the National Bank recorded allowances for credit losses of $111 million. They were $57M in 2022.

Consequently, Desjardins maintains its recommendation to keep the title, but reduces its target price over one year from $105 to $103.

Earnings before provisions and taxes from international markets also seem to be a cause of concern for analysts. For specialized finance in the United States and elsewhere internationally, they stood at $192 million, while Desjardins was expecting $15 million more.

These adjusted profits for the third quarter are $128 million, five less than the consensus of analysts. Desjardins saw a potential of $142 million in it.

“Results in this sector are below our expectations,” explains Desjardins. The Cambodian subsidiary ABA Bank, which constitutes a large part of this sector, continues to face significant pressure on its net interest margins. […] This deterioration is explained by a slowdown in Cambodia’s economy. »

Note that in 2019, National Bank increased its stake in ABA Bank (Advanced Bank of Asia Limited) to 100%, which at that time had assets of more than $5.3 billion.

At the close of trading on Tuesday, the value of the Bank’s stock was $100.47. Two days later, it had fallen to $94.17. However, it is still far from its 52-week low of $82.17, reached in October 2022.

Dominique Talbot