12:56 PM EST, 11/11/2024 (MT Newswires) -- RBC has updated its models for the Canadian Big 6 banks to allow for lower impaired PCLs than was previously assumed (partially offset by an increase in RBC's performing PCL estimates).

"We make various tweaks to our bank models which increase our estimates slightly by 0.7% on average, and we model Q4/24 core EPS to decrease ~4% QoQ but increase ~10% YoY on average for the large Canadian banks in our coverage." Several banks are also expected to declare dividend increases.

Interest rates are declining which has reduced RBC concerns on mortgage payment shock. However, analyst Darko Mihelic believes this period of declining rates could also create a period of intense mortgage competition in Canada. Should such competition ensue, Mihelic believes TD may be an aggressor, and special attention will be placed on the reactions from CIBC in particular but also Scotiabank, but for different reasons.

CIBC has not actively pursued strong mortgage growth in the current environment but likely would defend share in a "mortgage war". Scotiabank, while focusing on deposits, would still want to defend and possibly grow its mortgage business. This mortgage competition will likely take place over a 2 to 3-year period, so there could be waves of competition and tactics are likely to evolve and change, Mihelic noted.

"We anticipate a cautiously optimistic forward view on earnings and credit quality as we become increasingly more bullish on bank stocks all else equal."

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