John KimRoyal BankRY.TOHOLDSep 25, 2019

Today 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.

She'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. 

Among all the Big 6 banks, this would be his choice. Clean story, premium valuation (which is fine with him). Gold standard.

His favourite, the 800-pound gorilla. The biggest, the baddest, and it dominates.

Banks were the second-best performer in 2025 globally. Now, he's trimming his Canadian banks based on valuations. Be careful if you're concentrated in Canadian banks.

Banks in general have peaked but Royal Bank is a little different and is sort of at a base level. He holds TD and CIBC.  Long term banks are good but we are entering a pause period which could go for up to a year. He is not recommending buying banks now,

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.

Has done well, but pulled back a little, which makes it an opportunity. Is the largest Canadian bank, very diversified with strong wealth management, so somewhere defensive. Pays a 3% dividend, not the highest, but still good. They bought HSBC a few years ago. It trades at a premium to the group, but boasts a higher ROE.

(Note the shortish timeframe.)  HSBC acquisition and its global capabilities are starting to bear fruit. Looking to expand wealth management in Middle East and China, thereby improving its positioning.

He'll get into banks again when prices are better. If the problems of GSY spread up the affluence chain, banks will have problems. Housing market is sloppy. Our economy is being bailed out by gold and oil prices. 

This is the class act you can buy and be fine over the long term.

Revenues went up last quarter, but so did costs. Needs better loan growth to hit ROE targets. Shines in asset management and capital markets. As market stabilizes, lots of opportunity in IPOs and M&A.

Always the gold standard if you're looking for a Canadian bank.

Disclosure:  His old employer.

Outlook is favourable. He owns BMO, RY, and TD. All 3 had good earnings, with TD probably the best. But the other two were also strong.

Tight, well-regulated oligopoly. A need, not a want. Diversified by geography and line of business. Good line of sight through the cycle to high, single-digit rate of dividend growth. He's overweight the banks.