Opinions
Barry Schwartz
National Bank of Canada
NA-T
WEAK BUY
Mar 03, 2025
Stock price when the opinion was issued
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Despite its expected growth, National remains cheap. It trades at 12.16x PE, compared to TD's 17.6x and Royal's 15.82x. True, NA's 3.13% dividend yield falls short of, say, BMO's 4.62%, but the projected growth makes up for this. Another plus is that National has no exposure to office real estate in the U.S., and only 8% exposure in commercial real estate there. Most of the bank's assets and operations lie in Canada. NA-T is a buy and hold.
Overall, banks should be correcting a little more than they are now. He sees some growth risks in Canada specifically. A bank like this, that's mostly exposed to the Canadian consumer and market, will have a bit of a correction if our economy is weaker.
Likes the name, but he'd wait for more of a drop before putting in new $$, perhaps another $10 lower.
If only he could roll back the time machine on his portfolio.... The bank that grew up and took a well-deserved seat at the big boys' table. Exceptional bank, packs a big punch in capital markets. Standout results. Purchase of CWB is a hand-in-glove fit, strategically sound, likely accretive. Lots of blue sky ahead, no qualms adding.
Likes it in general. Great platform and franchise. If economy is heading for a contraction (for whatever reason), this name doesn't have the geographic exposure of the other 5 banks. Mainly in Quebec; very small US and international footprint. Extremely good job of growing, so he wouldn't bet against management. It's a macro call.
Disclosure: his dealer custody is with NA.
Both have a very large domestic presence, which helps them in this environment. Both had very good numbers last quarter and are very good businesses. As expected, all banks increased credit provisions.
RY will benefit more from its large capital markets business. Volatility helps capital markets a lot; perhaps you won't get the M&A, but a lot of trading goes on with equity, debt, and other derivatives. It's global. Expectation in US of deregulation in financial services; if so, RY will benefit a lot more than NA.
NA is smaller and more focused in Quebec, though the CWB acquisition is changing that.
No qualms buying. Coast-to-coast Canadian bank, with modest international exposure. CWB acquisition brings both revenue and cost synergies. Good capital markets and pretty good wealth management. Overexposure to the dynamically growing Quebec has been to its advantage. Pullback is a pretty good entry point.
In his opinion, the only quality banks in Canada are RY and NA. Best run for decades. He's not a huge bull on the Canadian banks, but this is one of the two names he'd buy.