Canadian Banks Expected to Post Solid Q3 Results Amid Valuation Concerns

Canadian banks are expected to have a solid third quarter, according to Desjardins Securities analyst Doug Young. He predicts 'strong capital markets and wealth management results' due to plateauing provision coverage ratios (PCLs), strong regulatory capital positions, steady stock buybacks, and potential for further upward revisions to estimates.

The sector has been trading at a 37-per-cent premium on a price-to-book value basis compared to its historical average. Young downgraded Canadian Imperial Bank of Commerce (CM-T) and National Bank of Canada (NA-T) to 'hold' ratings from 'buy', citing valuation concerns, while maintaining 'buy' ratings for Toronto-Dominion Bank (TD-T), Royal Bank of Canada (RY-T), and EQB Inc. (EQB-T).

In a separate development, 5N Plus Inc. (VNP-T) saw its shares plummet 8.6 per cent after reporting in-line quarterly results, but Scotia Capital analyst Jonathan Goldman remains optimistic about the company's secular growth runway.