Things aren’t exactly looking rosy for the Canadian bank sector, as revealed by some recent news that suggests headwinds are in the making for them and the broader Canadian economy. However, Canadian bank stocks are largely shrugging this news off, turning up in Tuesday afternoon’s trading.
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Bank of Nova Scotia (TSE:BNS) (NYSE:BNS), Canadian Bank of Commerce (TSE:CM) (NYSE:CM), and Toronto Dominion Bank (TSE:TD) (NYSE:TD) were all up, albeit fractionally, in the session.
The first major stumbling block to hit Canada’s banks today was news that the plan to “go green” may not produce much green—by which I mean cash—for the banks, and it might not do much good for the environment, either.
Critics have lambasted Canadian banks for years, basically declaring the efforts behind “sustainability-linked financing” (SLF) to be little more than window dressing in a bid to look like lowering a carbon footprint without doing much to help. Indeed, as several major banks noted, those efforts may indeed not turn out to do much about emissions.
Then The Credit Problem Hit
This is a problem by itself, but the following issue is likely a more immediate problem. Word from Experian Canada revealed that Canadian businesses have a lot more trouble than going green. Business insolvencies in 2023 were up 41.4% compared to 2022.
Meanwhile, 14.3% more businesses missed a payment on a credit product in the fourth quarter of 2023 than in the fourth quarter of 2022, suggesting that missed payments may be getting worse.
One possible culprit is several Canadian Emergency Business Account (CEBA) loans coming due, which puts new strain on businesses already weakened by macroeconomic issues.
Which Canadian Bank Stock is a Good Buy Right Now?
Turning to Wall Street, the leader in the sector is TD stock, a Moderate Buy-rated stock that offers a 9.56% upside potential against its average price target of $65.18 per share. Meanwhile, the laggard in the field is BNS stock, a Hold-rated stock with an average price target of $49.22 per share, giving it a downside risk of 1.11%.
