It's been a difficult period for the big banks in Canada following a sell-off across the stock markets and investors looking at the European banks, which have slipped by around 30 per cent since the year began, as a sign that banks here too will plunge. Indeed many US banks have also struggled: with Bank of America and Citigroup both having fallen by 28-29 per cent; and the likes of JPMorgan and Wells Fargo also down by 15 per cent.
By comparison, however, Canadian banks have been able to hold relatively firm. In the case of the Bank of Nova Scotia, it had slipped by around 5.9 per cent as of last week; while the Toronto Dominion Bank and National Bank of Canada were down 8.3 per cent; the Canadian Imperial Bank of Commerce was down around 7.1 per cent; and the likes of the Royal Bank of Canada, Bank of Montreal and Canadian West Bank had all slipped in the region of 10 per cent.
Such comparatively small falls are reflective of some consistent resilience among the banks here, which are known to be among the most conservative in their management worldwide. Look back at the previous financial crisis and you’ll see that the country’s banks survived without slashing dividends or dilutive prices for the raising of capital. So, while the dramatic fall in oil prices is worrying, perhaps we can expect them to hold firm one more time?
Let’s take a closer look at the leading three:
Royal Bank of Canada:
The most profitable and biggest Canadian bank reported its net income at the year ending October 31 – an eye-catching $10billion. While its shares have fallen more than 14 per cent since June last year most analysts still give it a “buy” recommendation because it has such a dominant position across the retail sector and is rapidly growing its wealth management arm.
Toronto Dominion Bank:
Though it is the second biggest bank in Canada it actually boasts more branches in the US than here. Its net income at the end of October 31 was $8billion: up from $7.88billion one year before. Again, most analysts place it with a “buy” rating because it has been able to grow its credit card offering thanks to a number of strategic purchases over the last couple of years, such as: Nordstrom, MBNA Canada and Aeroplan.
Bank of Nova Scotia:
A truly international Canadian bank – it boasts 40 per cent of its income from areas such as Asia, the Caribbean and Latin America – its net income fell slightly on October 31, standing at $7.2billion, a slip from $7.3billion the prior year. However, a growing wealth management arm and a strong position in key developing markets mean it retains its “buy” rating too.
Given their solidity then, it appears the Canadian banks have been able to remain among the strongest in the world. Even a commodity focused market is unlikely to change that.