No matches for this search
Try adjusting your filters or search criteria
Financials
The actions by the OCC reinforce Veritas’ preference for RBC to remain focused on Canadian banking and for the divestiture of its US subsidiary, City National Bank. However, this seems increasingly unlikely as it will take several years for the bank to resolve issues outlined by the OCC. Additionally, further monetary penalties may be levied if sufficient progress is not made. These actions will likely also weigh on CNB's profitability as costs associated with resolving these issues place upward pressure on CNB's efficiency ratio. These actions by the OCC may serve as prelude for potential actions against TD Bank with a substantial monetary penalty and a cease-and-desist order likely in play.
Financials
Growth at any price? While the acquisition of First Horizon certainly makes strategic sense as it expands TD’s footprint into attractive Southeastern US markets, Nigel D’Souza questions whether it makes financial sense. TD’s purchase price represents an implied P/B multiple of 1.75x. Even after fully realising expected cost synergies (which won’t happen until FY25), FHN is expected to generate a return of ~10% on invested capital. By comparison, North American banks that generate a 10% ROE typically trade at a 1.0x P/B multiple.
Canadian Banks
Financials
Rising risks trump rising rates - Nigel D’Souza expects market sentiment to shift over the coming months as slowing economic growth and elevated credit risk outweighs the benefit of higher NII. Ahead of this inflection point, Nigel is lowering his sector forward P/E multiple for Canadian banks to 10.6x (NB assuming a pre-pandemic PCL ratio, it currently stands at 13.5x, the highest multiple since the GFC). He downgrades Scotiabank, CIBC, National Bank, RBC and TD Bank to Sell. If you are taking money off the table in banks, consider moving it to the insurers. Nigel continues to pound the table on Manulife Financial and recently upgraded Sun Life and Great-West Lifeco to Buy.
