CIBC cuts price targets for Canada's big banks as macroeconomic picture becomes less certain, analysts say

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Click here to see other videos from our team. If you refresh your browser, or CIBC cuts price targets for Canada's big banks as the macroeconomic picture becomes less certain, analysts at the Canadian Imperial Bank of Commerce this week came out with across-the- board target price cuts for the big Canadian banks, saying that the macroeconomic picture was becoming less certain and could drag on results in 2023. CIBC analyst Paul Holden reduced the price targets for seven banks by five per cent on average, lowering the Bank of Nova Scotia from $150 to $146 to $100 National Bank of Canada from $103 to $100 Canadian Western Bank from $38 to $34 and Laurentian Bank from $44 to $41 The CIBC analysts do not maintain a rating or price target on CIBC. Holden and his team reduced earnings per share by one per cent for 2022 and four per cent for 2023 in anticipation of the slowing of loan growth and higher credit losses.

The team gave them an outperformer rating because of the lower valuation gaps among their peers, indicating less risk and a more defensive position in a recessionary environment, despite the fact that National Bank and RBC had their target prices trimmed. In a note to clients, Holden stated that banks were currently priced in line with a five-year average book value of 1.7 x, or about the same rate expected in a normal economic scenario and not accounting for an economic recession. There is downside risk to valuations if the outlook for economic conditions continues to be challenged, according to Holden. While Holden expects to see strong results in the banks upcoming second quarter earnings reports to be driven by loan growth of more than two per cent quarter-over-quarter, he noted that the headline results might not matter as an economic slowdown is increasingly being priced into the market.