Canadian Banks

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pitz
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Post by pitz »

So far, excellent results from BMO and BNS. BNS especially.

While their US-based bretheren are collapsing, the Canadian banks are holding their own quite nicely.
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Post by mpav »

pitz wrote:So far, excellent results from BMO and BNS. BNS especially.

While their US-based bretheren are collapsing, the Canadian banks are holding their own quite nicely.
Is excellent perhaps a too strong word? Both missed street expectations, but I am glad no big shocks were put on the table.

Will wait for CIBC,TD and RY as anyone of those could dish out some bad news and take the whole lot down with them.
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Post by retireat50 »

mpav wrote:
pitz wrote:So far, excellent results from BMO and BNS. BNS especially.

While their US-based bretheren are collapsing, the Canadian banks are holding their own quite nicely.
Is excellent perhaps a too strong word? Both missed street expectations, but I am glad no big shocks were put on the table.

Will wait for CIBC,TD and RY as anyone of those could dish out some bad news and take the whole lot down with them.
Yea I wouldn't call them excellent either. As a BNS shareholder I was pleased to read their news release about their results as I thought they were good given the doom and gloom in the sector. I then checked the share price actually expecting abit of a pop and was disappointed to see the shares actually getting pummelled....sigh. I guess it missed expectations by 2 or 3 cents a share.
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Post by mw »

I would call the results better than their U.S. peers but not "excellent". Excellent earnings would be those which could propel the sector back to its 2007 highs. At this point we have banks down 24% as a group from there, requiring a 31%+ gain from here to get back not including dividend contribution.

The problem banks face is they are currently still pointing down, as are their prospects which are directly tied to that of the economy.

That said there is some reason to believe they could find some lift out of this earnings season but its my current view that any rally from here will ultimately find active sellers in the not distant future. While there remains a significant and understandable spread between US and Canadian bank performance (currently US banks at -14.72% relative to Canadian) I don't see the Canadian banks widening that metric in their favour much in the near term.
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Post by Wallace »

mpav wrote:
pitz wrote:So far, excellent results from BMO and BNS. BNS especially.

While their US-based bretheren are collapsing, the Canadian banks are holding their own quite nicely.
Is excellent perhaps a too strong word? Both missed street expectations, but I am glad no big shocks were put on the table.
Maybe it's a good thing that Paul Martin scuppered the merger mania of the banks. Otherwise we might be in the same boat as the big boys across the border.

I own BNS too. Considering the carnage in the US (and in Europe) I think our guys have held up well. They'll come back.

In a few days, after the market has punished the banks for the misses they make, I think it will be time to buy.
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banks ,secure dividends??

Post by petfiora »

So, how low can they go? No talk of cutting dividends.
Is it just about time to buy?
BMO at this price would be paying about 6%.
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Post by mw »

If BNS holds > 46 perhaps that time is now. It may yet fill the gap left from the early part of the mid-July rally. Closing and holding under 46 would create an "island reversal" and infer a return to the July lows with a secondary target of 40 based on the measured move is more likely than not.

I've been short Canadian banks for big chunks of this year's decline and long them a couple of times. At present I am open to the possibility that they may find a bottom, but I doubt they will rocket higher at there is no reason for them to. That said I still hold some short positions which I may conclude this week depending on price action.

In the longer term where they goes depends on the economy. They could go much lower than this year's lows, given the right macro circumstances. About the only thing we do know with certainty is that they are not going to rocket back to 2007 highs, not this year, not next year, and perhaps not even by 2010.
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Post by lilbit »

Makes me very glad to have sold TD when it hit $68 and change, after picking it up at $61 earlier. I was too nervous to keep it, knowing there wasn't too much upside news to propel it much further. OTOH, they do a nice business with their investment arm, and increased trading in a range bound market may provide them with a nice earning suprise.
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Post by pitz »

No loss for CIBC today, although the write-downs were fairly severe, at $885 million for structured credit, and $16 million for downsizing expenses.

Tier1 capital is very strong, operations were very strong, in line with the banks that reported yesterday (BMO, BNS), and excellent performance in the corporate loans.

In this environment, and given their US exposure to structured finance, 'holding their own', IMHO, is a good thing.

The only thing that concerns me is the growing gap between "Securities borrowed or purchased under repurchase agreements", and "Obligations related to securities lent or sold short or under repurchase agreements". In 2008, the difference between the two numbers widened an additional $2 billion, leading me to believe that CIBC might be offside in some of its trades. "Other assets" has been climbing as well. $13 billion in Shareholders' equity supporting a balance sheet of $329 billion might raise some eyebrows.... (in particular, just what exactly is on the 'other' side of the risk-weighted trades, that allows them to come up with a Tier1 ratio of 9.1% -- hopefully not a ton of Fannie/Freddie bonds :( ).
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Post by I_DRIP »

Given the nice ~6% run on Cdn Banks today, I am wondering how long you folks think it will be until Cdn Banks return the the all time high water marks set over a year ago.

RBC for example, was 61ish. Do you think 2 years is realistic?
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Post by mw »

Two years? Depends on when economic conditions improve. They are likely to worsen from here still. Could be four. Its unlikely the profitability of banks will return to recent peak levels any faster.
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Post by pitz »

I_DRIP wrote:Given the nice ~6% run on Cdn Banks today, I am wondering how long you folks think it will be until Cdn Banks return the the all time high water marks set over a year ago.

RBC for example, was 61ish. Do you think 2 years is realistic?
There was no good reason for the Canadian banks to have gone down in the first place.
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Post by active »

They are likely to worsen from here still
The sad thing is that you read the press releases and quarterly financials without having any confidence that they tell you the truth.
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Post by BRIAN5000 »

The banks are 20 % off there lows, where have all the bargins gone?

The sun is shinning every thing is just fine now?
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Post by pitz »

BRIAN5000 wrote:
The sun is shinning every thing is just fine now?
Was there ever really a storm in Canada? Or just a bunch of ill-informed commentators in the media commenting on a storm in a far-away land called America?

This Canadian 'banking crisis' is just as fake as SARS, the Y2k bug, or any other scam the media has prepretrated on the Canadian public just to make stocks cheap for the insiders.
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Post by Mike Schimek »

Given the nice ~6% run on Cdn Banks today, I am wondering how long you folks think it will be until Cdn Banks return the the all time high water marks set over a year ago.

RBC for example, was 61ish. Do you think 2 years is realistic?
Yes, or less
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Post by squash500 »

Nice to see the xfn and xdv have a nice gain today :) . Took one less ulcer pill (nexium) as a result :) .
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Post by creep »

BRIAN5000 wrote:The banks are 20 % off there lows, where have all the bargins gone?

The sun is shinning every thing is just fine now?
What about BMO, I still think its a bargain at these levels.
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Post by mw »

pitz wrote:There was no good reason for the Canadian banks to have gone down in the first place.
That makes no sense whatsoever unless you are part of the Pakistan Exchange or one of these new fangled "stocks can only go up" folks.

Write offs are up, profits down, and loan loss provisions on the rise. That's reason enough for them not to be at record highs.

And then there is the economic outlook...
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Post by kcowan »

mw wrote:
pitz wrote:There was no good reason for the Canadian banks to have gone down in the first place.
That makes no sense whatsoever unless you are part of the Pakistan Exchange or one of these new fangled "stocks can only go up" folks.

Write offs are up, profits down, and loan loss provisions on the rise. That's reason enough for them not to be at record highs.

And then there is the economic outlook...
I think pitz was focusing on the initial decline which came about from fears of exposure to subprime losses. It turns out that those fears were well-founded if an over-reaction. However, now there are good reasons for being cautious with banking stocks as you have indicated.

Quiz: Where is there a market where a bank can post an EPS of $1.00 down from $1.49 and see its shares go up?

Nobody ever claimed markets were rational.
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Post by Wallace »

We're being told, in the last week of the election, that the economy is "sound" and that banks in Canada are not in the same position as those in the USA and around the world.

Is this really so?

One of the biggest problems in the present global financial crisis is the freezing of the flow of money between individual banks and the central banks (Blocked Pipes)

But if our banks are so stable, with the good balance sheets and lack of exposure to ABCP, why are they not lending to each other? And from the Bank of Canada? This is a fairly small economy. Why isn't the money "going round" in Canada.?

Just trying to make sense of this, like everyone else .... :? :?
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Post by JaydoubleU »

I've been wondering about that too, Wallace. Aren't Canadian banks lending to Canadian businesses?

Do regulated utilities get special consideration as they provide essential services?
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Post by scomac »

Yes I think things are different here, although the press is most certainly implying that it may not be. Teck Cominco was able to arrange $9.6B in financing in order to acquire Fording Coal. AFAIK, that deal is going through exactly as planned, but it isn't getting talked about in the press. Only the BCE deal gets headlines and the principles there swear up down and sideways that funding is in place despite the participation of foreign banking institutions. Now granted, both of these deals have been in the works for a while now and there is no guarantee that either could procure funding today. I would think that until it's proven otherwise, it would be best to give the benefit of the doubt. It doesn't really appear to me that the worst case scenario is being priced in equally across all of our banks. Clearly two or possibly three are getting hit much harder than the rest at the moment. Two weeks ago, it wasn't the case.
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Post by brad911 »

I think you're going to see in future months looking back on current quarters revenues for our banks that they've been very busy taking on new investment clients in the wake of the US carnage. There was an excellent article in the FP over the weekend where it was being discussed how RY can now charge a premium for its services where only last year it was almost forced to cut its margins just to stay competitive.

Large hedge funds and private equity funds are looking for a much safer place to operate in light of all the troubles pulling money out of US investment banks.

Why they're not lending I think is more for protection OR they're ramping up for something big in the way of acquisition and want the proper capital ratios for when/if that occurs.
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Post by kcowan »

scomac wrote:It doesn't really appear to me that the worst case scenario is being priced in equally across all of our banks. Clearly two or possibly three are getting hit much harder than the rest at the moment. Two weeks ago, it wasn't the case.
Looks like BMO is getting hit worst and CIBC next worst. The rest seem to be pretty even:
The Big Five

Is that rational?
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