Bank of Nova Scotia’s earnings report, kicking off the sector’s quarterly results on Tuesday, is expected to reflect continued resilience in the Canadian banking industry despite economic uncertainties, according to BMO analyst Sohrab Movahedi. The analyst predicts that while the results may not mark a major turning point, factors such as net interest margin (NIM) expansion, fee-revenue growth, and positive operating use will offset muted loan growth and elevated provision for credit losses (PCLs).

Bank Earnings Outlook and Valuation

Movahedi stated that the forward price-to-earnings (P/E) multiple of 13.0 times for the bank index has reached the upper end of its historical range. However, he remains constructive on the sector, citing prospects for above-average earnings growth and continued return on equity (ROE) improvements. The analyst noted that year-over-year cash operating earnings per share (EPS) growth is expected to be around 8 percent, with higher growth anticipated at Royal Bank of Canada (RY), Toronto-Dominion Bank (TD), Canadian Imperial Bank of Commerce (CM), and National Bank of Canada (NA), while lower growth is expected at RY and NA.

Downside risks remain, particularly the threat of a Canadian economic recession and sluggish loan growth due to unresolved trade uncertainties. The analyst’s Outperform-rated banks include RY, TD, NA, CM, and EQB.

U.S. Tariff Adjustments and Global Trade Impacts

In a separate analysis, BofA Securities economist Carlos Capistran estimated the effective U.S. tariff level after the Supreme Court struck down most Trump-era International Emergency Economic Powers Act (IEEPA) tariffs, including those on reciprocal and fentanyl measures. In response, President Trump imposed a 15 percent global Section 122 tariff and announced new Section 232 and 301 investigations.

Capistran noted that the U.S. effective tariff has fallen to 11.6 percent, which could drop below 10 percent when measured by revenue. Brazil, Canada, and Mexico are the primary beneficiaries of the new tariff structure. Brazil’s effective tariff dropped to 17 percent from 40 percent, while Canada and Mexico saw their effective tariffs fall to 2 percent and 4 percent respectively, due to exemptions for goods compliant with the United States-Mexico-Canada Agreement (USMCA).

Other beneficiaries include Venezuela, El Salvador, Guatemala, and Ecuador, whose recent bilateral deals have shielded large portions of their exports from the new tariffs. Venezuela, for instance, remains exempt from the tariffs on oil exports, which are already subject to a 15 percent rate.

Copper Mining Sector Analysis

Scotiabank analyst Orest Wowkodaw suggested that copper miners remain attractive despite recent price gains. He estimated that the sector is currently trading at an average implied copper price of $6.48 per pound, which represents a record high but is supported by a reasonable 12 percent premium to the spot price of $5.78 per pound.

Wowkodaw noted that the premium has increased from 7 percent at the start of the month and 3 percent at the beginning of the year. However, the current 12 percent premium remains below the three-year average of 19 percent but is modestly above the long-term average since 2018 of 10 percent. The analyst highlighted that First Quantum Minerals (IVN), Ero Copper (ERO), Capstone Mining (CS), and Ivanhoe Mines (IVN) are among the least expensive miners, while Antofagasta (ANTO), Southern Copper (SCCO), and Freeport-McMoRan (FCX) are the most expensive.

Wowkodaw emphasized that FM and IVN appear the most undervalued on a relative basis, with IVN benefiting from elevated prices for platinum group elements (PGE) at its Platreef mine. Conversely, ANTO and SCCO are considered overvalued, with the analyst preferring FCX and Lundin Mining (LUN) for their quality. However, CS, ERO, and IVN have released relatively disappointing guidance updates, which may affect their performance.

Wowkodaw’s Outperform-rated stocks include First Quantum Minerals, Ivanhoe Mines, Capstone Mining, Hubby Minerals, and Ero Copper, based on their relative valuations and guidance expectations.