Most Canadian banks are now trading at attractive multiples compared to historical averages (lowest in the last 10 years), and we think that a definitive pause in interest rates can help boost sentiment for Canadian stocks. A definitive pause in rates would bring more clarity to investors and businesses, and it can also help to stimulate economic growth. While higher rates benefit the net interest margin for banks, higher rates also suppress loan growth rates and the capital markets, and this so far has been a drag on banks. We feel that clarity around the future path of interest rates as well as increasing growth in the Canadian economy would benefit Canadian bank stocks.
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