Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Barclays analyst Brian Morton initiated coverage on both Canadian and Mexican banks, and he likes the latter more,
“Given differences in loan and deposit spreads, Mexico banks have been able to generate net interest margins in excess of 6% compared to roughly 1.5-2.0% for Canada banks … While the economies of all three large North American countries appear to be slowing, Mexico seems relatively better positioned … Deposit growth for the Mexican banks in our coverage universe is approaching 20% year-over-year, while overall industry deposit growth for the Canadian banks is in the low single digit range … ROEs for the Mexican bank industry have been improving post pandemic and are approaching the 20% range … For the Canadian banks, ROEs are in the mid-teens … credit quality trends are normalizing for the Canadian banks, creating a slight headwind … . On risk based capital ratios, both Canadian and Mexican banks remain well capitalized. In terms of CET1 ratios, the Mexican banks range from the mid-teens to over 20% … Earnings Momentum. Given the higher loan and deposit growth as well as the stable credit environment, we see EPS growth for the Mexican banks in the high-teens over the next two years compared to flat to up low-single digits for the Canadian banks … We are initiating on BMO and NA in Canada and GFNORTEO and GENTERA in Mexico with Overweight ratings, while rating BNS and CM Underweight.”
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RBC Capital Markets analyst Paul Treiber provided his favoured stocks in the domestic technology sector,
“Of the 15 companies in our Canadian Technology coverage universe that have reported calendar Q4 earnings, 73% (11 stocks) have exceeded revenue expectations and 27% (four stocks) have missed consensus. This performance is better than that of the 100 largest tech stocks in Canada (the “Canadian tech top 100″), where 52% exceeded revenue expectations and 48% missed last quarter. Across our coverage, Q4 results have been healthy. However, companies’ outlooks or comments regarding 2024 and Q1 have weighed on many stocks, raising concerns such as the sustainability of consumer spending, headwinds from reduced enterprise discretionary spending and elongating enterprise sales cycles, and the magnitude of profitability improvements. For the remainder of 2024, stocks most attractively positioned in our coverage remain Constellation, Shopify, Kinaxis, and OpenText”
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Scotiabank strategists and economists published a special report on Canadian immigration,
“In 2023, Canada experienced massive population growth of 1.25M people, which benefited overall GDP growth but had a negative impact on productivity and GDP per capita. In this report, Scotiabank Economics argues that current immigration trends are unsustainable, absent higher investments. In the near term, population growth will likely remain robust: in 2024, Scotiabank Economics forecasts 1M-plus people … Scotiabank Economics estimates that Canada’s current population growth exceeds the country’s economic capacity to effectively integrate these large numbers … There is a sweet spot when it comes to economic immigration – where everyone is better off over time – but it is narrow and Canada has strayed far off course”
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Diversion: “Here Are the Internet’s Dumbest Theories About Kate Middleton” – Gizmodo