Credit Suisse is adding Canada’s big banks to its coverage universe, expecting an average total return of 20 per cent from the Big Six over the next 12 months.

In a note to clients on Friday, Credit Suisse Analyst Joo Ho Kim outlined several growth drivers he’s eyeing for Canada’s banking sector. Those include continued loan growth, signs of an improving macroeconomic outlook and discipline around expenses and capital deployment.

Kim awarded outperform ratings (the equivalent of a buy) on four banks and neutral recommendations (the equivalent of a hold) on the remaining two.

• Bank of Montreal: Outperform, 12-month price target of $159
• Canadian Imperial Bank of Commerce: Outperform, 12-month price target of $81
• National Bank: Outperform, 12-month price target of $106
• Royal Bank of Canada: Outperform, 12-month price target of $153
• Bank of Nova Scotia: Neutral, 12-month price target of $88
• Toronto-Dominion Bank: Neutral, 12-month price target of $102

“We believe upside to our estimates could come from better-than-expected net interest margin expansion, loan growth, and efficiency improvements. Our forecast reflects conservatism behind several drivers, in addition to our belief that a material adverse scenario affecting the banks’ balance sheets and forward earnings is a tail risk at this time,” Kim said.

“We believe the market will pay for quality to a greater extent in times of elevated uncertainty.”

He expects the banks to grow its earnings per share by mid-single-digits for the 2022 and 2023 fiscal years. Canadian banks begin reporting their next quarterly financial results next week with the Bank of Montreal and Bank of Nova Scotia kicking things off on Wednesday.

Some potential risks to Kim’s forecasts include an unexpected downturn in economic conditions, a meaningful change in the banks’ business strategy and weakness in Canada’s housing market which could weigh on credit quality, he added.