Insights: Canadian Banks

Canadian Bank CEO Event with RBC & TD

On June 9, 2022, we hosted a panel discussion on the Canadian banks with Dave McKay and Bharat Masrani, CEOs of Royal Bank and TD Bank, respectively. During the panel discussion, the CEOs discussed their views on a variety of topics, including the current macro environment, domestic banking, housing, consumer debt, and their international platforms.     Disclaimer: Commissions, trailing commissions, management fees and expenses all…

Canadian Banks: TD Buys FHN – A Very Strong Fit

After much speculation in recent years about its appetite for additional U.S. bank M&A, TD offered ~US$13.4 bln in cash to buy First Horizon Corporation (FHN)[1], a Tennessee-based regional bank, in late February, almost 15 years since its last “large” U.S. bank acquisition – Commerce Bancorp. In our view, the acquisition offers many strategic benefits given FHN: (i) is an optimal size, adding material scale with…

Canadian Banks: 2022 starts with M&A; Recovery Continues (fQ1 in Charts)

2022 is off to a noteworthy start for the Canadian banks, with long-awaited M&A announcements and another strong earnings season. In December, we posted our outlook for the year, “Canadian Banks: Five Possible Drivers in 2022”, in which we stated that the cyclical recovery was not yet over. We identified five factors that we expected would influence bank share prices during 2022: (i) reserve releases, (ii)…

Canadian Banks: BMO’s High Risk, High(er) Reward Acquisition of BoW

Bank of Montreal recently announced the acquisition of BNP Paribas’ U.S. retail banking subsidiary, Bank of the West (BoW) for ~C$20 bln – the largest acquisition in Canadian banking history. The transaction is very different from prior acquisitions made by the Canadian banks and is further complicated by the fact that BoW is not publicly traded (wholly owned by BNP), so most Canadian investors have limited…

HCAL/HCA Lead All Canadian Bank ETFs in 2021

During 2021, the Hamilton Enhanced Canadian Bank ETF (HCAL) and the Hamilton Canadian Bank Mean Reversion Index ETF (HCA) outperformed all other Canadian bank ETFs, rising 51.5% and 40.3%, respectively. Entering last year, we forecast the Canadian banks would have a very strong year (see our insight “Q4-2020 Takeaways – Recovery Has Started” and our video “Three Potential Catalysts for 2021”[1]). HCAL outperformed all strategies by…

Canadian Banks: Five Possible Drivers in 2022 (Q4 2021 in Charts)

HCAL Ends Year #1 as the Top Performing Canadian Bank ETF; Hamilton ETF AUM Exceeds $1 bln  Before we discuss our outlook for 2022, we wanted to highlight that the Hamilton Enhanced Canadian Bank ETF (HCAL), the top performing bank ETF since its launch in October 2020. Year-to-date (2021), HCAL is outperforming equal weight/yield weighted strategies by 9% and covered call strategies by 14-17%. As of November…

Canadian Banks: How High Can Dividends Go? (and HCAL Outperforms)

Canadian bank dividends, in our view, are poised to rise – a lot. In August, before Q3 earnings season, we argued there was no policy rationale for the continuing moratorium on dividend increases (see “Canadian Banks: Why OSFI Should Lift its Dividend Cap Now”). At the time, earnings and capital were already at all time highs. Moreover, the banks had set aside an enormous ~$21.4 bln…

Canadian Banks: Record Earnings/Capital; Still in Catalyst #2 (Q3 2021 in Charts)

Q3 earnings trends for the Canadian banks were again strong with record earnings and capital levels, while the ‘three catalyst’ investment thesis – normalization of profits, reserve releases and higher margins – we laid out for the sector in February continues to play out almost exactly as predicted[1]. We believe the banks are still supported by Catalyst #2. Before we discuss Canadian bank results in more…

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