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Credit Suisse analyst changes ratings on 2 Canadian banks


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According to Market Intelligence, April 2023

Credit Suisse analyst changes ratings on 2 Canadian banks


Credit Suisse analyst Mike Rizvanovic downgraded Toronto-based Bank of Nova Scotia to "neutral" from "outperform," based on uncertainty in the outlook for international banking and relative weakness in Canadian personal and commercial banking, according to a report.

The downside risk of Bank of Nova Scotia's business in Mexico and Chile was one reason listed for the downgrade. "While we continue to favor the bank's more focused international strategy over the longer-term ... we believe those headwinds will limit the relative upside to share price in the near term," Rizvanovic wrote.

Rizvanovic also wrote that the bank has underperformed peers in personal and commercial banking, "and we see further challenges ahead given the bank's less favorable funding mix." The analyst also expects the company's expenses will increase because of technology initiatives.

The analyst's estimated earnings per share for the bank are C$7.13 for 2019, C$7.41 for 2020 and C$7.76 for 2021. The target price was set to C$76, up from a previous target of C$75.

UBS analyst Brock Vandervliet downgraded Columbus, Ohio-based Huntington Bancshares Inc. to "neutral" from "buy," according to a report. The analyst sees the bank's EPS growth slowing because of slower loan growth, a "shallower" net interest margin 2020, reduced buybacks and higher provisioning.

The bank's commercial and industrial portfolio is significant and the industry may be slowing. "While consumer loan growth could offset a portion of the lower C&I loan generation, this is unlikely given [Huntington's] already large consumer exposure," Vandervliet wrote.

The analyst is now predicting net interest margin of 3.20%, down from 3.23%, based on new guidance from the bank. Estimated earnings per share remained the same for 2019 at $1.30. But the analyst changed 2020 EPS estimates to $1.32, down from $1.36, and 2021 to $1.44 down from $1.57. The price target was set at $15.50.


Credit Suisse's Rizvanovic upgraded Toronto-based Royal Bank of Canada to "outperform" from "neutral."

The upgrade was based on "the bank's superior scale in Canadian [personal and commercial] banking," and "superior earnings quality," according to a report. "[Royal Bank of Canada's] superior scale in Canada will prove beneficial in finding efficiencies," Rizvanovic wrote. The bank has a diversified earnings mix, according to the analyst.

The analyst's EPS estimates for the bank were C$8.90 for 2019, C$9.05 for 2020 and C$9.45 for 2021. The target price was changed to C$108, up from C$102.

Raymond James analyst Michael Rose upgraded Gulfport, Miss.-based Hancock Whitney Corp. to "strong buy" from "outperform."

The company has "enhanced scarcity value" following the announced merger of First Horizon National Corp. and IBERIABANK Corp., the analyst wrote. The merger will also provide Hancock Whitney with opportunities for customer and lender acquisition, and the bank has an "improving capital return story," according to Rose.

The analyst's estimated earnings per share for the bank was $4.03 for 2019 and $4.22 for 2020, unchanged from prior estimates. The target price was raised to $50 from $44.

"With enhanced scarcity value following a handful of larger deals announced this year, [Hancock Whitney's] position in several attractive, high growth markets position the company for solid organic growth, opportunistic acquisitions, and as an attractive acquisition candidate for a larger player," Rose wrote.