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Analyst Actions: Barclays Canadian Banks Q3-14 Outlook: Value in a Low Volatility Environment

Barclays on Tuesday published a report entitled - Canadian Banks Q3-14 Outlook: Value in a Low Volatility Environment.

It says while the banks' valuations were largely rewarded with increases coming out of the second quarter, it could very well be a result of few competing options. Barclays says it does not know when volatility will return to the market but, in the intervening period, the steady growth in earnings and dividends generated by the Canadian banks continues to garner attraction and are increasingly being valued by investors.

Barclays says yield remains compelling: Dividend yields remain attractive and, with valuation shifting towards 2015, P/E multiples do not look as rich. While significant multiple expansion may be difficult to achieve, they do not represent an impediment to additional growth in absolute terms.

Barclays also says look for growth outside of domestic retail: Barclays continues to believe that relative growth will be generated by the banks that are less beholden to domestic consumer lending. While this points to the three largest banks RBC (RY.TO, RY), TD (TD.TO, TD) and Scotiabank (BNS.TO, BNS), Barclays notes that Canadian Western (CWB.TO) continues to generate strong growth on the back of its largely commercial exposure, despite generating almost all of its revenues domestically.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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