Analyst John Aiken has downgraded Bank of Montreal (TSX:BMO), Royal Bank of Canada (TSX:RY) and TD Bank (TSX:TD) to underweight, from equal weight.
Aiken says consumer borrowing, the main profit driver for the Canadian banks, is likely to slow down even more than previously expected.
He says the sharp decline in the price of oil will be a negative for the country overall, with the potential for recession in Alberta offsetting any of the benefits, such as lower gasoline prices.
Aiken also says the Bank of Canada's surprise interest rate cut on Jan. 21 will put pressure on the commercial banks' lending margins, which will hamper their earnings growth.
The central bank reduced its overnight lending rate to 0.75 per cent from one per cent and Canada's biggest lenders have only partially passed along the savings, reducing their prime lending rates by only 15 basis points instead of the full 25.
Aiken wrote in a commentary that Barclays doesn't anticipate a "significant uptick" in demand for consumer loans and said it's likely the banks margins will be squeezed incrementally.
"As a result, our reduced estimates imply low single-digit earnings growth for 2015. "