Commentary: HFIN

Canadian Banks: History Points to a Stronger 2024 (after Two Tough Years)

At the end of August, the S&P/TSX Canadian Diversified Bank Total Return Index (“Canadian bank index”) was lower versus two years earlier – a rare event. In fact, since its inception in May 2002, the Canadian bank index has had a negative rolling two-year return at just 24 month-ends (out of 232 month-ends)[1]. Historically, such an occurrence has represented a buying opportunity. Over the same 20+…

Canadian Banks: Three Ways the Banks Might “Clean Up” fQ4 (and Improve f2024)

The Canadian bank index is at roughly the same level it was two years ago – a very rare event[1]. Coming out of COVID, the sector rallied to a new peak in February 2022 when inflationary concerns took the index down over 20% in the following months, to levels it has remained on and off since. Part of the reason Canadian bank stocks have not risen…

Canadian Banks: Opportunities and Risks in 2023

The Canadian banks had a very tough 2022 falling 8.9% – just the 5th decline in the last 20 years, which includes financial crisis years of 2007 and 2008[1] (the sector even rose 3.8% in 2020, despite COVID). The main reason for the decline last year was falling price-to-earnings multiples caused by the market’s concern that global central banks could cause a recession by aggressively raising…

Canadian Banks: Three Things to Watch in Q4

Even with the strong November, Canadian bank stocks are down ~15% peak-to-trough, reflecting the market’s concern of a possible global recession caused by central banks aggressively raising interest rates with the goal of taming inflation. At the same time, central bankers are also engaging in the relatively new policy of quantitative tightening (the effect of which cannot be quantified). The decline in Canadian bank share prices…

Canadian Banks: Should Investors be (More) Worried? (fQ3 in Charts)

As the market has priced in a higher risk of a recession, Canadian bank stocks have declined ~20% in just 5 months, including a ~10% decline since the sector started reporting Q3 results in late August. The market is worried that central banks will cause a recession as they aggressively raise interest rates to tame inflation. Further complicating their job is that central banks are simultaneously…

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…

Hamilton ETFs Launches Hamilton Enhanced Canadian Financials ETF

TORONTO, January 26, 2022 – Hamilton Capital Partners Inc. (“Hamilton ETFs“) is pleased to announce the launch of the Hamilton Enhanced Canadian Financials ETF (“HFIN“). HFIN seeks to replicate, to the extent reasonably possible and before the deduction of fees and expenses, a 1.25 times multiple of the Solactive Canadian Financials Equal-Weight Index. HFIN has closed the offering of its initial units. Units of the ETF…

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…

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