Over the course of the past few weeks many financial publications and analysts have reported on how Canadian Banks are the envy of the banking world with beefed up capital ratios and conservative lending practices.
Have they escaped the market carnage? In relative terms to other banks around the world maybe, but in absolute terms no. The Royal Bank of Canada’s stock price is down almost 52% from May of 2007 closing Friday at $ 29.40.
The question is, despite reasonable valuation metrics and elevated dividend yields at current prices, have we seen the high water mark for earnings this past quarter and moreover are Canadian banks simply lagging the rest of the financial world?
Toronto-Dominion Bank chief executive Ed Clark said Wednesday that while “I’d like to prove myself wrong,” the first quarter would likely be the best for Canadian banks. “In both Canada and the U.S. we see PCLs (provisions for credit losses) going up. I don’t see how they couldn’t be going up,” he said.
Disclosure: I own Royal Bank personally and we own it in client accounts.
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