07:44 AM EDT, 05/17/2024 (MT Newswires) -- It is difficult to be optimistic on the Canadian banking sector, CIBC Capital Markets said.

"With banks trading right around historical average valuation multiples, we think it is difficult to make a bullish call on the sector," analyst Paul Holden said in a note to clients.

"Revenue growth is subdued and credit risk is elevated," Holden said.

"We are not making a call for downside risk to FQ2 earnings, but do think there is risk to guidance and EPS estimates for H2/F24," the analyst said.

"It may be difficult for current valuations to be sustained if EPS estimates continue to bleed lower."

Holden said he favours the insurance sector over bank stocks, and rates National Bank of Canada ( NTIOF ) and EQB Inc. ( EQGPF ) at Outperform, with price targets of $109 and $100, respectively.

The other Canadian banking stocks are rated Neutral.

(MT Newswires covers equity, commodity and economic research from major banks and research firms in North America, Asia and Europe. Research providers may contact us here: https://www.mtnewswires.com/contact-us)