Citigroup's bank analyst revised her numbers on Royal Bank of Canada on Monday after being told last week she got her sums wrong.
Shannon Cowherd, a New York-based analyst at Citigroup, put out an extremely negative research report on RBC last week that highlighted an estimated $10.2-billion in potential writedowns.
While everyone expects Canada's biggest bank to record some writedowns when it reports second quarter numbers on May 29, no other analyst forecast more than $800-million. RBC took the unusual step of putting out a news release to say Ms. Cowherd's work “contains significant errors in fact.”
In her latest report, sent to clients on Monday, Ms. Cowherd revised her estimates “based on incremental information and a broader comparison of similar institutions' related writedown/mark-to-market valuation metrics.” She is now forecasting $1.8-billion of writedowns. Citigroup maintained its "sell" rating on RBC.
Where Ms. Cowherd had estimated RBC would write down $2.7-billion of exposure to Canadian bank-sponsored asset-backed commercial paper, she now forecasts there will be no writeoff at all.
And where she had predicted a massive 80-per-cent cut in the value of the bank's U.S. auction rate securities, a $3.7-billion writedown, she is now estimating a 10-per-cent downgrade, which translates into a $467-million writedown.
