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Highlights
- Statistics Canada recently reported that inflation climbed by about 5.1 per cent year-over-year (YoY) in January 2022, with shelter and grocery prices increasing faster than other major components.
- As a result, the Bank of Canada is expected to push up the interest rates in the announcement scheduled for next month to fight back inflation.
- Royal Bank of Canada and CIBC can also feel an impact from the US Federal Reserve-led rate hike as they also operate in the United States.
Statistics Canada recently reported that inflation climbed by about 5.1 per cent year-over-year (YoY) in January 2022, with shelter and grocery prices increasing faster than other major components.
As a result, the Bank of Canada is expected to push up the interest rates in the announcement scheduled for next month to fight back inflation.
On that note, let us talk about two financial stocks that might see significant changes in their outlook depending on the interest rate hike.
Also read: Absolute (ABST) & Magnet (MAGT): 2 TSX cybersecurity stocks for 2022
Royal Bank of Canada (TSX:RY)
The much-expected interest rate hike could influence Royal Bank of Canada’s outlook in its Q1 FY2022 earnings release scheduled to be out on Thursday, February 24. The bank is also expected to pay a quarterly dividend of C$ 1.20 per share this day.
Royal Bank of Canada, presently holding a market capitalization of C$ 200 billion, saw its stock price spike by almost 27 per cent year-over-year (YoY).
RY stock closed at C$ 141.05 apiece on Friday, February 18, marking a year-to-date (YTD) gain of approximately 27 per cent.
Canadian Imperial Bank of Commerce (TSX: CM)
The C$ 72-billion market cap bank reported a 42 per cent YoY increase in its fourth-quarter net income to C$ 1.44 billion in 2021.
CIBC stock galloped by about 40 per cent in 12 months, trading at C$ 160.61 on Friday.
Bottomline
Royal Bank of Canada and CIBC can also feel an impact from the US Federal Reserve-led rate hike as they also operate in the United States.
As experts mull over how much change we may see in the interest rates in case of a hike, investors should be alert about the latest announcements made by the central bank before picking any stock.
Also read: Cielo (CMC) & FirstService (FSV): 2 value stock for Canadians
Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
