Are Canadian banks exposed to Europe?

The potential for several European sovereign defaults, and slower U.S. economic growth, continues to loom over markets around the world. CIBC analyst Rob Sedran tells BNN that while Canadian banks have little direct exposure to Europe, they will be hurt by a slowing economy.

"The good news from the Canadian bank standpoint is that European direct exposure is quite manageable," he says. "They don't really have any big business reason for having big exposure to Europe and so they don't."

Sedran says growth prospects -- particularly on trading revenue -- will likely be lower going forward.

"There's not really a yield curve anymore…and there's not a lot of ability to position yourself on that curve to record some of the trading revenues they've seen in previous quarters," he says. "We're getting nervous as we look into 2012 that maybe we're going to be below trend for the entire year and that trading numbers need to come down and ultimately we'll have to bring our earnings estimates down as well."

"If we have a double-dip or we end up back in a much slower economic environment then there's more work to be done on these estimates," Sedran adds.