RBC Capital Markets analysts expect more stock buyback activity for all large Canadian banks and lifecos in their coverage universe, believing their capital would “reach excessive levels by 2027”.
In a note to clients on Friday, they adopted a cautionary tone regarding sector valuations.
“In our view, for most banks and lifecos to achieve their return on equity (ROE) targets they may need to implement restructuring programs, complete ROE accretive acquisitions or simply have business growth beyond our current assumptions," the analysts wrote.
The RBC analysts pointed to Bank of Nova Scotia (TSX:BNS), National Bank of Canada, and iA Financial Group as the only large companies they cover expected to achieve their medium-term core ROE targets by 2027.
RBC upgraded TD Bank to ‘Outperform’ from ‘Sector Perform’, while lifting their target price to C$120 per share from C$93.
The analysts also lowered their target price on BMO Capital Markets (NYSE:BMO) to C$163 per share from C$168 and downgraded the stock to ‘Sector Perform’ from ‘Outperform’.