Analysts Revise Bank Targets Following Robust First-Quarter Performance
Financial analysts have issued a series of upward revisions to price targets for Canada's major banking institutions after reviewing stronger-than-anticipated first-quarter earnings reports. The adjustments reflect improved assessments of return on equity, net interest margins, and overall financial resilience across the sector.
Royal Bank's ROE Performance Draws Attention
National Bank Financial analyst Gabriel Dechaine highlighted Royal Bank of Canada's return on equity of 17.6 percent in the first quarter, suggesting this metric may be "underappreciated" by market participants. While RBC's ROE expansion of 60 basis points quarter-over-quarter trailed the peer average of 150 basis points, Dechaine noted the performance still exceeded expectations and marked the fourth time in five quarters that RBC surpassed its 17-percent medium-term target.
"RY's ROE performance could be relatively resilient," Dechaine emphasized, pointing to the bank's limited reliance on ROE expansion in the Capital Markets segment, which increased by just 30 basis points sequentially.
Despite RBC shares closing down 2.1 percent on Thursday following earnings release, the bank reported adjusted earnings per share of $4.08, exceeding both Dechaine's $3.90 estimate and the consensus forecast of $3.85. The analyst attributed the beat to stronger revenue generation from trading activities, lower expenses, and reduced provisions for credit losses, partially offset by a higher tax rate.
Dechaine raised his target price for RBC shares to $257 from $241, maintaining an "outperform" rating, while the Street average stands at $249.19 according to LSEG data.
TD Bank Shows Strong Operating Leverage Potential
RBC Dominion Securities analyst Darko Mihelic raised his forecast for Toronto-Dominion Bank following what he described as a "solid result" in the first quarter. Mihelic predicted TD would possess "among the highest operating leverage in 2027 in the bank group" due to restructuring programs and potential loan growth acceleration.
TD reported adjusted earnings per share of $2.44, significantly surpassing both Mihelic's $2.21 estimate and the Street's $2.26 projection. The beat was driven by stronger-than-expected performance across most segments except Wealth Management and Insurance.
"Canada Personal and Commercial, Corporate, and Wholesale adjusted earnings were particularly strong versus our forecasts," Mihelic noted, adding that total revenues exceeded expectations while provisions for credit losses and expenses came in lower than anticipated.
Mihelic increased his core EPS estimates to $9.54 for 2026 and $10.46 for 2027, while raising his target price for TD shares to $148 from $133 with an "outperform" rating.
CIBC's Fundamentals Support Premium Valuation Argument
TD Cowen analyst Mario Mendonca argued that Canadian Imperial Bank of Commerce's fundamentals and return on capital support trading at a "premium" price-to-earnings ratio following stronger-than-expected first-quarter results.
CIBC shares rose 2.9 percent on Thursday after reporting adjusted earnings per share of $2.76, representing 26 percent year-over-year growth and exceeding both Mendonca's $2.47 estimate and the Street's $2.50 expectation. Pre-tax, pre-provision earnings grew 19 percent, topping the analyst's 11-percent projection.
"CM continues to deliver solid relative net interest income growth and net interest margin performance," Mendonca observed, noting that all-bank NIM increased 6 basis points quarter-over-quarter, benefiting from improvements in both Canadian and U.S. commercial banking segments.
The analyst raised his target for CIBC shares to $153 from $142, maintaining a "buy" rating, while citing the bank's consistently good PTPP growth, strong NIM profile, capital strength, and steady credit metrics as supporting a higher P/E multiple relative to peers.
Other Notable Analyst Actions Across Sectors
The analyst report also included several other significant revisions across various sectors:
- TD Cowen's Vince Valentini downgraded Quebecor Inc. to "hold" from "buy" despite strong wireless growth, citing valuation concerns after a nearly 70-percent share price increase over the past year.
- Scotia Capital's Jonathan Goldman trimmed his target for WSP Global Inc. to $284 from $320 while maintaining a "sector outperform" rating, noting AI-related concerns despite the company's 20th consecutive earnings beat.
- National Bank's Maxim Sytchev raised his target for Stantec Inc. to $163 from $161 following what he called a "strong end" to 2025 and "upbeat" 2026 outlook.
- Multiple analysts adjusted targets for Pembina Pipeline, Canadian Utilities, Cascades, 5N Plus, CCL Industries, Enerflex, EQB Inc., Gildan Activewear, Granite REIT, Morguard Corp., Northland Power, and Stella-Jones.
The comprehensive analyst actions reflect ongoing reassessment of Canadian companies across financial services, telecommunications, engineering, and industrial sectors following first-quarter earnings releases and updated guidance.
