Canadian Banks update

[selkirk]

all five Cdn. banks are reporting their earnings in the next couple of weeks. so since know people on this forum own BNS, TD, Royal Bank, CM.

also have discussed the banks as investments for years.

1. Bank of Montreal BMO
Reported gains for Q2 2007 of 1.44, that does not count an isurance gain and trading losses. hopefully one time,...at least for the natural gas trading losses.

bmo $70.64 cdn. yield 3.85%
2006 earnings/share 5.09 2007 $5.50estimate 2008 $5.90-6.05

the bank loss money on natural gas trades. most deal with one trader and their is an investigation in the US. the problem is that the bank was not known as a trading bank. they losses equal 2/3 of the profits they ussually made in this area. the bank plans to maintain this trading since the profits should increase. of coarse they state they will put better procedures to prevent further problems, time will tell.....

the trading losses work out to roughly .18 share loss, and insurance gain would be .05.

they plan to cut 300 million in costs, the bank is not as efficient as others. 50% of the costs should be completed by the end of 2007.

Revenue growth was 9%,

Harris Bank may face more competition in Chicago, whoever buys AB Ambro and get the Lasalle bank, will put more money and try to grow the operations....

hopefully BMO could turn around Harris bank or sell the bank, could mean $10 a share to BMO. would prefer they sell it to a large US/international bank. and take a large ownership position.

would rate the bank a hold but believe it has upside potential if they can
1. make Harris bank more efficient, or sell it,
2. assure the street no more trading losses.
3. improve cdn. retail banking.

thanks
selkirk

 

[selkirk]

TD Bank

TD Bank

would like to state that most of the numbers are in cdn. dollars (which is getting to par with the US dollar... )

however all banks trade on Toronto and NYSE.

TD Bank
$73.47 yield 2.89%

TD reported eps 1.36/share Q2 2007
investment bank earned 217 million, great result that beat esitmates of 160-180 milion.

earnings per share 2006 4.56 2007 5.50est. 2008 6.05 - 6.15 e

TD Canada Trust (retail cdn. division) earnings grew by 16% year over year.

wealth management 18%
TD securities 55% (this is smaller number, and this growth will not be maintained)

Bank North 5% year over year, this is there US expansion efforts, they hope the bank contributes at least $500 million at least.

the returns from Bank North have been disappointing. time will tell if they can turn the operation around.


TD ameritrade is hoping to turn its operations around..... time will tell.

TD is a good long term investment. their cdn. retail banking division, is great and should maintain 15% year over year profit growth.

also there is a chance for upside if they can make Bank North more profitable. and Ameritrade improves.

rate long term buy.

thanks
selkirk

 

[selkirk]

Royal Bank

Royal Bank

Royal Bank is the one stock so far, CIBC still has to report that reported their numbers and the stock went down.

Royal bank

price 58.83 cdn. 54.88 US yield 3.3%

Royal bank reported .99 earnings per share/Q207, they missed esitmates that ranged from $1-1.02.

Their Cdn. insurance division was one of the reasons for the miss, they earned $43 million instead of $100 million -110 as estimaed.

Earnings grew 17% year over year.
also some concerns in the US sub prime market, the US Int Banking division only had a return of 8% in earnings year over year.
though this has been improvement.

earnings per share 3.61 2006 4.20-4.26est 2007 4.50-4.65est 2008

Royal Bank should be able to get better performance from the insurance division. the market took the stock down a couple of dollars.

Royal Bank has one of the best retail operations (if not the best ) in Canada. the stock trades under 14X earnings.

short term hold. long term buy.

thanks
selkirk

 

[selkirk]

BNS

BNS

Bank of nova Scotia BNS had a great quarter.

$54.15cdn. 50.61 US 3.4% yield

BNS profit rose 16% year over year, and their revenue increased 13%.

profit came in at 1.03 above .95 estimates.
they also raised the quarterly dividend from .42 to .45

one of the reasons was the low loan losses. that amounted to .04 a share.

year over year earnings grew by 23% in their cdn. banking division....a great year, will probably not be able to maintain that performance,still 15% year over year growth can still be accomplished.

Int. Banking 10% year over year, this is actually a good result considering the strength of the cdn. dollar. large positon in Latin/South America. and growing slowly in Aisa.

Scotia Capital 16% year over year. the markets have benifitted from a strong bull market.

recently sold a few indivual shares to friends to get them in a BNS DRIP/SPP.

this will allow them to buy more share without com. and have the dividends reinvested.
they have never owned shares before. so this is one way to introduce people to investing. told them though there may be ups and downs, the stock should return 10% on average per year....counting div.


thanks
selkirk

 

[DOGS THAT BARK]

Latched on to this per your recommendation some time back-stock increased bout 25% in last 3 months-Thank you again-- Mr Kirk

 

[selkirk]

BNS is a good stock DTB, probably will not move much more but should do avg. 10% and maybe more if your timing is good. probably makes sense to own BNS for any US investor since they are the most international of the cdn. banks, and have little in the US.

well now there are two banks that went down after earnings. CIBC fell after it came out with earnings.

CM price 102.40 cnd. 96.48US

earned EPS 2.29, taking out the one time items came in at 1.95 versus street forcasts of 1.91-1.92. however some people thought the bank may come out with a blowout quarter over $2 in EPS.

the taxes were lower 24.5% than 27% estimated, also there is concern about loan losses.

Retail revenue growth grew by 1-4%, depends what you want to include in the number, to explain would take a short novel.


the Caribean bank contributed .05EPS this quarter and is growing at 27%. the news is only good on that front.

ESP 2006 6.85 2007 8.00-8.05est 2008 8.50est
yield 3%

note:surprised they have not split the stock 2-1 or 3-1 and did a div. increase. Cdn. hate bank stocks over 70. and common for bank stocks to trade 60 or less.

short term hold long term buy


one final stock is National Bank, it is smaller than the big 5, however is well run and mainly based in Quebec but are expanding.

increased their div. by .06 and now yields 4%. and trades under 12earnings.

2006 5.05 2007 5.56e 2008 5.90

trading revenue was higher, and loan losses came in better than expected.

personal and commercial banking division only grew by 3% year over year....that is the only negative saw in the report.

National bank often trades cheaper and sometimes even goes more on sale....... one to keep a watch on...

short term hold long term good buy for income and growth.....

thanks
selkirk

 

[selkirk]

my final post on cdn. banks until they report again in three months, just a brief description of what will drive these banks and make them different. well talked about most of these points....

also have stops on 75% of my bank positions. these have had good runs for the most part and I want to protect my profits. the remaining 25% is long term holds, until something changes.

would set stops, or take some off the table if this selling presure continues....want to ensure your profits..... long term I like these banks and the financials in general.

1. TD
TD has a great retail division in cdn. one of the best. and a huge profit generator. they also own 40% of TD ameritrade and have had their names dragged in the mud by two hedge funds for no good reason. end of rant...lol.

the big question is can they turn around Banknorth. if they can this stock is a great buy. Banknorth operates in the US Northeast....not an easy place to operate a bank.

TD is well run. good bank and investment long term.

2. BNS Scotiabank
good retail cdn. banking division, with incredible results latley.... more of the growth, half rev. is coming from int. operations. if you want to play Latin south America banking, not a bad way of doing it.... starting to grow in Asia....

give them 3-5 years and this may be a great story.
very few holdings in the US, so a play on Cdn. and an increasing amount on international.

3. CIBC
CIBC has had a rough day, or week. the earnings did not blow the doors off, and went down. later a head teller claimed she was owed overtime since 1998. she filed on behalf of her lawyer a lawsuit for 600 milliion for the other tellers. you think this would have come up, lawsuit are more rare than they are in the US.... time will tell....probably will settle.... the bank denies the charges.

that is short term noise. good retail operations and has CIBC world Markets.... this division produces good numbers especially in bull markets.

CIBC would be rated a hold..... just wait may go on sale more.

4. Royal Bank
Royal Bank has a great retail banking division....in Canada... would rate them or TD as the best followed closely by BNS.

Royal bank had a few problems with insurance and smaller problem with sub prime...minor. should be able to fix these problems and numbers were good.

US operations seem to be slowly improving

short term there is weakness....long term buy.

5. BMO
what do you with Harris Bank, sell it, I would like them to sell (exchange) for a ownship position in a larger US or international bank.

Harris bank is a great property and has great value...however it has underperformed....and it is getting harder to compete in the midwest.

Retail division use to be one of the best and has fallen to the worse.....still these problems could be fixed...

not bad value and they like to increase the dividend. hopefully they will do something good with Harris Bank.... stand still does not seem to serve shareholders.

short term hold/sell long term weak buy....depends on harris bank.


6. National Bank
close to fully valued for now, though it is cheaper....if it goes on sale much more will start looking at a purchase, around 5%.

positons : own CM, BMO, BNS in a DRIP/SPP account. have owned these positions for at least ten years, and are long term holdings.
only 3 availble in DRIP/SPP

have $56 cdn. puts on Royal Bank so the puts are in the money....June.... will not be the worse trade of my life...got $2 for the puts.
close 55.89 cnd.
if the stock goes up will write more puts on the stock probably.

TD do not own it $72.07 though if it falls in the 68-66 range will look at it. cnd.

BNS own BNS have stops on 75% of the positions, other 25% has no stops. also own BNS in DRIP/SPP and not touching that position....


thanks
selkirk