Jefferies Financial Group (JEF) has raised its price targets on most of Canada’s commercial banks ahead of their upcoming quarterly financial results.
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Citing minimal impacts from tariffs and trade disputes, Jefferies analyst John Aiken took his price target on Royal Bank of Canada (TSE:RY), the country’s largest lender, to $207 from $198 previously. He also lifted his price target on TD Canada Trust (TSE:TD) to $117 from $103, and Bank of Montreal (TSE:BMO) to $164 from $150.
Despite the raised targets, Aiken warned that valuations on Canada’s commercial banks are “approaching ‘priced for perfection territory,’” and that any earnings miss could send share prices sharply lower. He also wrote that he expects “modest” earnings growth driven mainly by reduced provisions for bad credit rather than meaningful revenue growth.
Tariff Impacts
The outlook for Canada’s banking sector from Jefferies is notable in that Aiken states that “both the Canadian and U.S. economies have managed to shrug off most of the feared negative consequences of the threatened tariffs… apparently, the end is not nigh.”
Still, Jefferies notes that revenue growth at Canada’s lenders has been a “struggle” with consumer loan growth slowing, commercial lending demand weakening, and capital markets revenue soft. Loan growth is expected to remain muted until business and consumer confidence across Canada improves, wrote the analyst.
Is JEF Stock a Buy?
The stock of Jefferies Financial Group has a consensus Moderate Buy rating among three Wall Street analysts. That rating is based on one Buy and two Hold recommendations issued in the last three months. The average JEF price target of $59 implies 5.72% downside risk from current levels.
