Opinions Steve Belisle
Royal BankRY.TOBUYSep 08, 2016
Steve BelisleStock price when the opinion was issued
As of Jun 26, 2026. Market Open.
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You can buy those calls back, and then roll up to $320 or so. If you buy back the near-term call, and then sell a longer-term call, chances are it won't cost you any money.
Absolutely don't sell a put to oblige yourself to buy more, not right now. You want to sell puts when the premium is really good. Premium here isn't good, as stock's been heading straight up.
Great quarter. Belle of the ball of the banks. Strength in Canadian lending in both personal and commercial. Less cyclical than before, as rough markets lead to more trading and helps diversify earnings profile.
He's a bit wary on the sector, and questions the high valuation as well. Always traded at a premium -- stability, growth, strength in wealth management. But the premium has eroded, as they're all expensive now; that argues for holding onto this one. CEO stated that demand for credit and loans is staggering, which would support another leg up.
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Premium contentAs the Canadian economy appears more resilient than analysts estimate, we reiterate RY again as a TOP PICK. Most recent quarterly earnings showed growing cash reserves, while debt was retired and shares bought back. The Capital Markets division saw a 23% increase in earnings over the year. The dividend has grown over 10% annually over the past five years. We recommend trailing up the stop (from $242) to $251, looking to achieve $333 -- upside potential of 18%. Yield 2.2%
(Analysts’ price target is $271.11)
It doesn't matter which Canadian bank you bought 20-30 years ago; all offered double-digit returns with growing dividends. No question that their valuations are the highest in a long time, because they sailed through all worries (higher mortgages, a Toronto housing collapse didn't happen, tariffs, Iran war). Meanwhile, the banks have transformed more to fees and recurring revenue.
Premium contentToday he's taking money off the table in the sector. Why? Valuation. Trading today at 2.6-2.7x forward book value, yet the business hasn't really changed all that much. In on the SpaceX IPO, which is like money from heaven.
Martin Cobb, ASIPShe's been wrong about the Canadian banks the past year, that they're expensive. They were up 30% last year + 20% this year. These stocks are priced for perfection and trading well above historical averages in PE. Wait. Last year, they released provisions for loan losses into earnings, which was a temporary boost. Their only growth aspect this year is how many branches a bank can close, which is a weak growth driver. She hasn't bought any banks this year.
He's a big fan of EQB. Phenomenal CEO, who'll take company to new heights. Will most likely outperform in next 3-5 years. Organic growth will be higher. A more agile and flexible organization. Digitally native, so it's built to adapt. Very conservative provisioning.
You buy RY for stability, its huge infrastructure, and capital markets business. Sufficient provisions for consumer credit issues. Very solid hold for the longer term.
Both are a Buy in his books.
Premium contentWe reiterate as a TOP PICK RY, one of five Canadian banks who have partnered to create the Defense, Security, and Resilience Bank (DSRB) designed to provide funding to the Government of Canada's commitment to boost military spending. Recent reported quarterly earnings showed a 12% increase in net income along with growing cash reserves as the bank bought back shares and retired debt. It trades at 17x earnings, 2.6x book and supports a 16% ROE. We recommend maintaining the stop at $220, looking to achieve $284 -- upside potential of 18%. Yield 2.6%
(Analysts’ price target is $245.07)
His favourite, the 800-pound gorilla. The biggest, the baddest, and it dominates.
Brendan Caldwell
With Iran conflict, yield curve has gone a bit flat, so net interest margins aren't going to be as good. If the conflict persists, earnings will possibly decelerate. This name is best positioned for all that. Usually trades at 11% premium to peers, now 8%.
If you assume that the conflict gears down to more manageable levels, you could buy the banks here and this name is the best choice.
Canadian banks have shown their resiliency and good risk management in this energy downturn, and have come out of much better than what people expected. Most of the banks have been taking big restructuring charges lately, consisting mostly of severances that they have been paying. This bank has not done that. They have been taking small charges every quarter, but they left that in their adjusted earnings, which means their earnings quality was quite good. Have reduced their Canadian tellers from 11,000 to 6000. They are the most efficient bank in digitalization, so they have the lowest cost of production. Also, their provisions for energy loans were much higher than what they needed to take, and those provisions could come back into earnings in the next few years.