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Earnings revisions for Canadian banks have recently turned positive for the first time this year, meaning that analysts are hiking their estimates rather than cutting them.Mark Blinch/Reuters

Canadian bank stocks have been struggling this year amid slow earnings growth, a weak economy, indebted consumers, concerns about the impact of oil prices and low expectations from analysts – but a strategist at National Bank Financial believes that the sector is at last ready to move higher.

Investors must be relieved to hear that note of optimism. Although bank earnings have been strong, the S&P/TSX commercial bank index has had a rough ride in recent months, challenging the widely held view that it is hard to go wrong with a bank stock.

By February, the index – which includes all of the big banks – had fallen as much as 15 per cent from its high in September, conforming to the popular definition of a correction. Although the index has bounced back since then, it is still down nearly 3 per cent in 2015.

Stéfane Marion, chief economist and strategist at National Bank Financial, argued that the economic backdrop for banks should support stock prices. Canadian full-time employment rose to a record high in May, offering a key driver for household formation and the housing market. As well, disposable income should be a boost from previously announced tax cuts and enhanced universal child care benefits.

"Stronger growth of household disposable incomes combined with the prospect of stronger business investment outside the Energy sector and a relatively steep yield curve is not a bad environment for banks," Mr. Marion said in a note. He has an "overweight" recommendation on the sector.

Analysts are sounding slightly more upbeat, too. Mr. Marion pointed out that their earnings revisions for Canadian banks have recently turned positive for the first time this year, meaning that analysts are hiking their estimates rather than cutting them.

Even so, the investing outlook is far from euphoric: Analysts expect earnings growth of just 5 per cent over the next 12 months, a level of caution that suggests the good news hasn't been factored into share prices yet.