Canadian banks will be cautious in funnelling money back to investors: Analyst
Canada’s benchmark stock index finished the trading session lower Friday as the financials subsector weighed on Bay Street.
The S&P/TSX Composite Index closed down 153.99 points, or 0.76 per cent, at 20,111.38.
The TSX financials subgroup was the biggest underperformer on an index-point basis, followed by the technology sector.
Shopify Inc., Toronto-Dominion Bank and Bank of Montreal were among the stocks that wiped the most points off the index.
The benchmark West Texas Intermediate crude price closed down 0.46 per cent at US$90.08 per barrel.
Shares of Shawcor Ltd. gained 28.08 per cent to settle at $7.89. The stock rose Friday following an announcement that it received a contract, valued at around $500 million, from the Mexican subsidiary of TC Energy Corp.
The company would be responsible for covering approximately 706 km of a 36-inch diameter pipeline with concrete weighted coating. The coating is expected to begin in early 2023 and will take roughly one year to complete, the company said in a press release late Thursday.
The Canadian dollar finished the day at 76.96 cents U.S., down 0.38 per cent.
South of the border, markets finished in the red. The S&P 500 fell 1.29 per cent, the Dow Jones Industrial Average dipped 0.86 per cent and the tech-heavy Nasdaq declined 2.01 per cent.
Victoria Fernandez, chief market strategist at Crossmark Global Investments, said amid current market volatility, she prioritizes profitability.
“The companies that are going to withstand that are the ones that have solid cash flows, the ones that have strong balance sheets, and good management and business models. So that's how we're approaching it,” Fernandez said in an interview Friday.
BANK EARNINGS SEASON
Next week, investors will be paying close attention to Canada’s big six banks as they report fiscal third-quarter results.
“As we saw with the U.S. banks when they reported last month, they actually took higher provisions, but that was related to an outlook on the economy — not necessarily any deterioration in their portfolio,” said John Aiken, head of research for Canada at Barclays, in an interview Friday.
“We think the similar stance is going to be taken by the Canadian banks again this quarter.”
Aiken added he thinks banks may be more cautious with dividend increases and share buybacks in the coming quarters.
“Definitely a little more cautious stance (with dividends and share buybacks) moving forward, just because of the uncertain outlook and where the macroeconomic trends are heading."