Canadian bank stocks have been riding a wave of investor optimism so far this year, but analysts say the first-quarter results that start arriving later this week will be a reminder of the mixed economic picture ahead.
“There is no doubt that the market’s almost singular focus on margins has already begun to weaken as capital concerns have taken some of that spotlight away,” he said in a note. Banks had until Feb. 1 to get their capital ratio to the new level of 11.5 per cent set by the Office of the Superintendent of Financial Institutions, which raised it by half a percentage point over concerns of higher risk from high household debt and rising interest rates.
Along with higher capital requirements, banks are having to increase provisions for credit losses, though they are still rising to more historic norms from unusually low levels. “Despite the slowdown in Canada’s housing market, for now, overall loan growth continues to hold steady. On the capital markets front, investment banking league table data is showcasing a relatively positive quarter.”