Will 2010 be good for the banks?
The first quarter at least will have its share of challenges as players contend with slowing economic growth and other headwinds, according to James Bantis, an analyst with Credit Suisse.
After a remarkable run in the second half of 2009 where the banks benefited from substantial trading profits, they now face a tougher environment characterized by slower revenue growth, low interest rates, and the uncertainty over new financial regulation.
"We expect the deleveraging theme to continue well into 2010, with a greater focus on reducing market related risk assets," Mr. Bantis said in a recent note to clients.
Though the financial crisis is mostly behind us, many players continue to back away from risky investments and pay down debt.
He asks the question: "What is new money in the sector really paying for?"
He argues that much of the good news including a return to normalized earnings and declining credit losses has already been incorporated in bank share prices.
The big banks kick off their Q1 season this week with CIBC and National Bank of Canada reporting on Feb 25 and Scotia wrapping up on March 9.