The combination of lackluster Q1/18 earnings and the downside volatility in market conditions over the past two months has resulted in CWB shares giving back a sizable 21% from its YTD high close on Jan 22nd. Of course, the pullback follows what had been a very strong run for CWB in 2H/17, as the earnings power of the company rebounded from the aftershocks of the energy downturn and has returned to the double-digit pace of EPS growth that was consistently seen in the 2010-14 period.
From a valuation perspective CWB shares are now trading at 9.5x our 2019E, a 9% discount to the sector avg. of 10.5x, and we note that the P/E differential is a wider 16% on a capital-adjusted basis. We expect to see an improved performance from the key net interest income components of CWB in Q2/18, and are of the view the recent market dislocation has provided a good entry point into the stock, particularly as we remain constructive on the EPS growth outlook of the bank in 2018E (+18%) and 2019E (+8%).