The Globe and Mail reports in its Thursday edition that investors were indifferent to U.S. banks posting strong first quarter results last week. The Globe's David Berman ponders whether Canadian banks next month will get the same response.
The U.S. banking sector beat profit expectations by more than 40 per cent.
However, the KBW Nasdaq Bank Index has retreated more than 2 per cent since the earnings season began last week. Mr. Berman says a key issue for Canadian banks is just how much good news has been baked into share prices.
Canadian banks have enjoyed a similar outperformance. The share prices of the Big Six banks are up 15.4 per cent year-to-date, beating the S&P/TSX Composite Index by about six percentage points. After looking cheap over much of the past year, bank stock valuations are now elevated and perhaps already reflecting good times ahead.
CIBC's Paul Holden suggests that U.S. banks underperformed because of lacklustre loan growth and loan margins. He says the 2021 Canadian bank stock rally may also pause until the sector delivers loan growth. Canaccord analyst Scott Chan says Canadian bank investors have plenty of reasons to look beyond any stall in the rally.
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