Javed Mirza Royal Bank RY-T PARTIAL BUY Oct 17, 2024

Costs and loan loss provisions were both a bit higher than expected last quarter. Usually get 7-10% compound return over time. Over 10 years, return was 13% annualized. Over 15-20 years, 12%. Likes RY for capital markets and wealth management. HSBC acquisition has turned out well. Dividends are growing for all the banks, but not hugely. Owns this one, doesn't touch the rest.

It did miss its last quarter's earnings but the core business is still doing well. There is maybe short term volatility but have patience. Banks are held for the long term and Royal Bank is good for the long term.

Yield of 3.5% is not as high as it once was, given the move in the stock price. About 15-16% ROE, and it retains half of that. If that can continue, should be able to grow the bottom line in mid-high single digits. Valuation is above historic averages. Better opportunities in the sector, such as TD.

Ranks 8/10 on fundamentals and value. Remains an anchor in the Canadian banking system. Diversified business model. Believes it's still on track for record earnings for 2025. Commercial metrics show signs of slipping, but good capital position and clean balance sheet.

Valuation not cheap, don't buy now. Decent yield of ~3.4%.

Not quite as much a premium to the group as it was. Delivering best on some of its earnings. 

Best Canadian bank. Going higher. Dominant personal and commercial franchise in Canada. US business not as good as the Canadian one, but has turned a corner. Biggest wealth management franchise in Canada. Global top 10 in capital markets, which should grow nicely.

Main reason to invest today is its purchase of HSBC Canada a year or so ago. Analysts haven't yet fully priced in the synergies from that acquisition. It now has more of a global platform. More global capabilities means you attract more global investors and more recurring revenues. 

Interprovincial barriers coming down in Canada and a higher infrastructure spend will promote growth in Canada, and the banks will benefit. Yield is 3.50%.

Extremely well-run and conservative. It has outperformed the S&P for decades. Is very bullish RY and Canadian banks. There's ongoing dividend and earnings growth. Is overcapitalized with lots of runway to deliver 8-10% earnings growth over time and therefore 10% annualized return for the next 5 years.

No red flags here. Always screens #1 or #2 in his work on NA banks. So consistent and efficient. Keeps doing the right things over and over. Cashflow to support semi-annual dividend increases has actually been declining the last 4 quarters. Payout ratio (his firm calculates it a bit differently) is 41%, very reasonable.

Long-term buy and hold. Get it in your portfolio and forget about it.

Like GS-N, it's the dominant bank in its country, and trades at a premium to peers, but deserves the premium because they've expanded into the lucrative wealth management area. They don't suffer problems in US retail banking like some peers; RY exited that decades ago. The forward PE of 13-14x is slightly higher than historic and this sector, but is justified through earnings growth.