Friday’s analyst upgrades and downgrades

Heading into earnings season for Canada ’s Big 6 banks, National Bank Financial analyst Gabriel Dechaine warns investors “patience is required,” seeing interest rate cuts as the greatest sector catalyst “insofar as they will alleviate investor concerns related to the credit cycle, as well as acting as a stimulant for credit demand .”

In a research report released Friday, Mr. Dechaine said he expects net interest margins to take a “small step back,” projecting the group to report low single-digits compression with a combination of fixed term deposit growth outpacing loan growth. He’s also anticipating a “slow and steady build” on the credit front with “a combination of fixed term deposit growth outpacing loan growth.”

Analyst: “Calendar Q1/24 U.S. bank results bode well fo RY’s Capital Markets business. Of note, the largest wholesale players in the U.S. reported aggregate FICC trading revenue growth of nearly 60 per centr Q/Q , Equities trading revenue growth of 32 per cent Q/Q and investment banking fee income growth of 25 per cent Q/Q . Considering that RY generates roughly 50 per cent of its wholesale revenues in the U.S, the bank should outperform its Canadian peers in this segment in Q2/24.

“With respect to the notable KPIs, transaction-based revenue was up 40 per cent year-over-year care of growing payments penetration which increased 330 basis points quarter-over-quarter to 31.9 per cent and ARPU expanding to $431 which helped drive an NRR of 110 per cent in FY24,” said the analyst.

“In reviewing QIPT’s PPE schedule we note the regular transfer of inventory on its balance sheet to rental equipment ,” he said. “We also note that this equipment has an exceptionally short average useful life of just over 12 months, and we view these rental equipment transfers effectively as Capex. QIPT finances the bulk of these purchases with equipment loans from financing partners, which are typically paid off over the life of the asset .

Source: News Formal (newsformal.com)

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