Canadian Western Bank (CWB.TO)

An underperformer relative to the other banks. We have slipped into a territory where, year to date, most banks are slightly in negative territory on a price point, but this one far more than the others. Despite that in the recent quarter, their provision for credit losses, seem to be holding up fairly well up. However, on a multiple basis, it doesn’t look exceedingly cheap relative to the other banks, except maybe on a Price to book basis. As the fallout from low energy prices reverberates through the economy, it is going to affect loan losses. Because of its much lower yield, he would prefer other banks. For a longer term play, it is not a bad place to be.

This has been tarred with the oil collapse so it is off 28% in the last year. Even though it has been much more oil concentrated in the past, it knows its business and it runs it really well. Yield of 1.94%.

Probably got hit a little bit more than it should have, given their long-term track record of being pretty good about managing through energy downturns. They tend not to be overly exposed to retail. Loan losses have ticked up, but not incredibly. A one-year target would be $30-$32.

Very much a local Alberta bank, and is so focused in that area that when you see a slowdown going, you have to look at who they lend the money to. There is a higher risk than with other banks, and the market is reflecting that.

It tends to be levered to the success of Alberta and Western Canada. This one took a hard hit when oil prices rolled over. You have to ask if oil has bottomed. He thinks it will range between $40 and $65. If it gets near the lows it makes sense to accumulate, but don’t expect a massive recovery.

Practically anything that is in Western Canada, people will see ghosts. This probably provides an opportunity for this bank. Importantly it doesn’t have much direct exposure to oil/gas accounts. It was unduly hit.

Has been punished in this energy downturn. There is some sort of opportunity emerging here, because this isn’t a business that is entirely dependent on oil production itself. It is dependent on the customers that are out there in that space. E&P companies have been out consolidating and shoring up their balance sheets. Eventually there is going to be a point where a lot of these assets and a lot of these businesses are going to be up for sale at bargain prices. Over the long term, you probably have an opportunity with this bank. Wait for an oil price improvement first.

He was interested in it when he took a look yesterday. It is cheaper than the other Canadian banks. The earnings forecasts have held out recently for Canadian banks so this one is not getting itself into trouble. He would prefer a little more dividend, but it is getting value. At $24 he would like it a lot.

This bank is off 20% in the last year. It is well-run and conservatively run, but is down purely on sentiment because of the oil patch. They are not nearly as exposed to energy as people think. Thinks it is on sale. Probably worth looking at.

This bank is very influenced by what is going on out west, and energy has not been a great place to be. It is coming back to the $26 support level that it had seen a couple of times since 2012. You want to see a successful test off of that. It looks like it is trying to bounce off the $26 level, but he would give it a bit more time.

This is a great bank, but has taken more of a hit than the other banks. Because they know they are in the middle of oil and gas country, they avoid direct lending to oil/gas companies and keep it quite low. Nonetheless, they are tangentially affected. This bank is off, but not often enough to give really excited about it. Their earnings will be fine, but he doesn’t think the stock will go anywhere significant for the next little while.

One of the smaller Canadian banks. He is cautious on it right now. You want to see loan loss provision scale up. Wait for it to get down to a 5% yield.

Has not been doing well, as have most Canadian banks. This is typical of the seasonality. From November until end of January they don’t do well. Then they do well until the end of April. The trend is on the downside right now. It is below its 20 day moving average and underperforming the TSX. Look at buying it in the next 3-4 weeks if you see signs of it bottoming.

He would avoid this bank. It has been a phenomenal name and a phenomenal story for a long time, but they are the most exposed to Alberta. If oil is going to stay down for some time, this bank is the most heavily exposed to Alberta.

Historically this has traded at a premium to Canadian banks. Given its exposure to Western Canada, you want to be very leery. Doesn’t think this is pricing in a lot of risks and bad debt.