12:54 PM EDT, 06/02/2025 (MT Newswires) -- Despite stronger than expected second-quarter results, National Bank's Gabriel Dechaine is taking a more cautious stance on the sector, as seen by its downgrades of CIBC and RBC.

"We didn't downgrade these stocks because of any negative view of their financial performance or strategies. Rather, we are simply embracing the caution that has been clearly reflected in bank commentary," writes Dechaine.

Aside from RBC's specific "peak PCL" commentary, other banks were subtly adjusting credit expectations. For example, BMO stated that tariff uncertainty could "add a few bps" to its high 40s impaired PCL ratio guidance, Dechaine notes.

"Until we see reasons to become more optimistic about the credit cycle and/or the loan growth outlook, we believe the sector will be trading in-line with the market."

National's only Outperform-rated stock is BMO, which is still in a turnaround after a disappointing fiscal 2024, and is showing progress towards its ROE expansion targets. National also believes investors will favour its relatively larger U.S. banking/earnings exposure.

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