Insights: Canadian Banks

Australian Banks: Entering Recovery Stage of Credit Cycle (in 6 Charts)

In this insight, we share 6 charts that, in our view, indicate that the Australian banking sector – one of the world’s strongest – has entered the recovery stage of the credit cycle, which should be supportive of share prices. In the past, we have described the Canadian and Australian banking sectors as being akin to fraternal twins given their significant similarities, as well as those…

Australian Banks: Outperformance vs Canada (akin to Canadian Bank #4)

In this insight we review the performance of the Australian banks versus the Canadian banks and discuss why Canadian bank investors should consider the Hamilton Australian Bank Equal-Weight Index ETF (ticker: HBA). Launched on June 29, 2020, HBA aims to replicate (net of fees) the performance of the Solactive Australian Bank Equal-Weight Index TR (SOLBAEWT) and is currency hedged. The SOLBAEWT index, which tracks the performance…

Canadian Banks: Outperformance from Mean Reversion (in 7 Charts)

As all Canadian investors know, the stock prices of the Canadian banks are highly correlated, and the individual banks have generated similar returns over long periods of time. Over the past several decades, the Canadian banks that have underperformed tended to catch up to those that outperformed, and vice versa – i.e., their performance was “mean reverting”. In this Insight, we discuss these mean reversion tendencies…

Canadian Banks: Three Vulnerable Loan Exposures (in Charts)

In our Insight, Financials: Does COVID-19 Represent a Growth Scare, Credit Event or Crisis (March 25, 2020), we discussed the implications of the global economy moving swiftly into an undetermined period of negative economic growth. For the banks, we fully expect the result will be a credit cycle. Although the peak of losses and the duration are very much unknown, we believe this credit cycle is likely…

Update: HFA Outperforming the Canadian Banks with Lower Volatility (in Charts)

The Hamilton Australian Financials Yield ETF (HFA) invests in one of the world’s best financial sectors, anchored by some of the world’s best capitalized banks. As evidence of the quality of the Australian financial sector, the Australian banks outperformed the Canadian banks during the global financial crisis. This strong historical performance is underpinned by the fact Australia is a higher performing economy, with GDP growth consistently…

One Chart: When/Where the Canadian Banks Spent US$32 bln on U.S. Banks

All Canadian bank investors know that expansion into the U.S. personal and commercial (“P&C”) banking sector remains the focal point of capital deployment for the Canadian banks. In fact, US banking has been – by far – the largest destination of capital deployment since 2004 (when TD Bank acquired a majority stake in Banknorth), with the Canadian banks having spent a huge US$30 bln. The chart…

Canadian Banks: One Chart Showing Higher Volatility Since New PCL Accounting Took Effect

In April we wrote an Insight in which we explained why we believed the volatility of Canadian bank stocks was likely to rise[1]. Specifically, we cited two reasons: (i) rising acquisition risk, and (ii) implementation of the new provision accounting (IFRS 9). Since the first reporting season (February 2018) following the introduction of this new provision accounting, it does appear that the monthly volatility for the…

Cdn/Aust’n Financials: Fraternal Twins w/ Low Correlations & Near Identical Risk Rewards

The Australian financial sector is among the highest quality and strongest in the world. It is also very similar to the Canadian financial sector. Arguably, there are no two financial sectors globally that more closely resemble each other than Canada and Australia. A desire to provide Canadians with exposure to this great sector is why we launched the Hamilton Australian Financials Yield ETF (HFA), which has…

Scotia’s Pacific Alliance and Five Takeaways on Global Growth

Last week, Bank of Nova Scotia reported its Q3 results and its International Banking division generated solid double-digit earnings growth, supported by a strong economic backdrop and acquisitions. Within this segment is the Bank’s operations in the Pacific Alliance, the Latin American trade bloc that includes Peru, Chile, Columbia, and Mexico. This very large emerging markets platform has over $100 bln in loans, generates earnings of…

BNN Bloomberg: Royal Bank Q3 Earnings & Canadian Banks Outlook

Rob Wessel was on BNN Bloomberg this morning to discuss Q3 earnings results for RBC and our outlook for the Canadian banks and the Hamilton Canadian Bank Variable-Weight ETF (HCB). Note to Reader: This Insight includes references to certain Hamilton ETFs that were active at the time of writing. On June 29, 2020, the following mergers took place: (i) Hamilton Global Financials Yield ETF and Hamilton…

Canadian Banks: Why Volatility Will Likely Rise (and a Comment on Mean Reversion)

In October 2018, we launched the Hamilton Capital Canadian Bank Variable-Weight ETF (ticker: HCB), which seeks to benefit from the historical mean reversion tendencies of the Big-6 banks, especially in times of greater market volatility. At the end of each month, the three most oversold banks are rebalanced to represent ~80% of HCB, while the three most overbought banks are rebalanced to 20%. HCB’s objective is…

Cdn/Aust’n Banks: Why the Big Housing Short is So Difficult (and the Risk of a “Direct Hit” Remains Low)

In Q4 2018, we expanded our ETF offering to include two ETFs with monthly distributions and exposure to two world-class – and very similar – financial sectors with excellent performance histories. In October, we launched the Hamilton Capital Canadian Bank Variable-Weight ETF (HCB), a rules-based strategy that seeks to capitalize on the historical mean reversion tendencies of the Canadian banking sector[1]. In December, we launched the…

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