Canadian Western Bank (CWB.TO)

It has not had a good year and is less expensive now. The problem is the exposure to lending in Western Canada. There were not a tremendous amount of debt restructurings in 2015 so he is cautious the longer oil stays low.

(Market Call Minute.) This has suffered from a slowdown out West. It is the middle of the pack for him. Has an okay yield. There is no compelling reason to own this when some of the other banks are trading at some of the same valuations.

Short. (A pairs trade with a Long on Callidus Capital (CBL-T).) This is essentially to take out some of the market specific risk and industry specific risk. Dividend yield of 3.41%.

Banks in general may be soft for a year or two. He would prefer ZWB-T, which does not own CWB-T. He would not step into ZWB-T yet.

This bank is so tied to the energy complex in the west and the western economy, there is probably going to be a little bit of rough water before calm seas set in. He would be more comfortable buying one of the bigger banks, as they are breaking out of their technical formations, meaning they are making better money. Watch the loan loss provisions get built into the big banks when they report in a month. If they start to go way up, that augurs poorly for this bank.

This has been unduly hit because of Alberta. He is trying to figure out how to play the Alberta recovery. (See Top Picks.)

It has been hit by the energy price. This one is down more because of where they are. It is a well managed bank. He has no problem with the stock.

(A Top Pick May 22/14. Down 33.35%.) Thinks the selloff has been overdone. This bank trades with oil. 40% of its assets are in Alberta. Last quarter earnings were quite good. It has sub-20 provisions for credit losses, which is well below all the other banks. Trading close to BV, and with a 3-5 year time horizon, it is a great buy.

A lot of equipment financing. He thinks reserves for loan losses will go up. If you have patience and can handle some volatility, it will pay off, even at these levels.

To some extent, he thinks the market has been unduly harsh, but it is really viewed as one of the best pure proxies on the economy in Western Canada. As a consequence there have been a lot of Shorts on the name. Believes it is one of the worst performing Canadian banks over the last 12 months, and doesn’t see that changing in the near future.

Very regional player. Banks came down recently. When oil turns around, this will tend to lead banks. A steeper yield curve would be better for all banks, if interest rates start to rise.

His preferred pick would be Toronto Dominion (TD-T) because of their access to the US and the revenue that is coming out of there. This is a bank that traditionally always trades at a premium of all the banks, because of the growth profile. It is currently trading at a discount. This is the bank that is going to perform the best when interest rates start to rise. Nibbling away at this would be a good investment for the long-term.

This wouldn’t have the exposure to Eastern Canadian lending, but it does have Vancouver lending in its mix. Also, has Alberta exposure, which is the weakest province from an economic standpoint. Stock has been hit quite hard, but he wouldn’t be a buyer here. (See Top Picks.)

This has really underperformed because of their exposure to Alberta, although he doesn’t know if that is fair. Have raised their dividend. Probably worth another look. A good one for the long-term. (He owns some of their preferred shares and some of their fixed income.)

An interesting story. The $26 level was pretty relevant back in 2012-2013. It became relevant again at the beginning of this year. If you are a long-term investor, you can buy at this level. You don’t want to see the $26 range broken. Risk/reward is really, really good at this level.