Canadian banks hit with downgrades as economic storm clouds gather
Canadian bank stocks may be running out of runway amid an uncertain outlook and potential recession looming on the horizon, leading some analysts to slash outlooks and hand out downgrades.
Barclays Bank PLC analyst John Aiken downgraded Royal Bank of Canada, Bank of Nova Scotia and Toronto-Dominion Bank on May 9, causing the S&P/TSX financials index to drop by one per cent.
Shares of TD fell more than one per cent throughout the trading day and closed at $81.35 after Aiken downgraded the bank from “overweight” to “equal weight,” the equivalent of moving a stock from a “buy” to a “hold.”
RBC’s stock also fell more than one per cent to $129.43 after being downgraded from overweight to underweight and Scotiabank shares fell by just over two per cent to $65.88 after it was downgraded from equal weight to underweight. Aiken also slashed his outlook for the sector to neutral from positive.
Though some analysts argue that the Canadian banks haven’t been hit by the full brunt of the United States banking crisis, economic uncertainty ahead is raising concerns for the financial sector. Still, those risks are unlikely to show up when Canadian banks report earnings at the end of the month.
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