Royal Bank (RY.TO)

$80 in 3 year’s time? He would buy any of the Canadian banks now. They have had a big pull back. If you factor in yield, growth and pricing, it could reach $80-$85-$90. It just depends on market circumstances.

(Top Pick Jan 21/15, Down 1.02%) He sold in August to lower his exposure to the Canadian economy and bought BBT-N which is an eastern seaboard US regional bank.

Safe? A big picture issue overhanging all of the banks is where they get close to a point where they may have to increase their capital. This bank has the 2^nd best tier 1 capital ratio of all Canadian banks, so they have room. The only thing that would put their capital into jeopardy would be a major acquisition, but that would be viewed by the market is favourable. He wouldn’t be concerned about this bank.

The sector has undeservedly lagged. They increased the dividend 8%, earnings increased 9%, but the stock is down. They just closed on City National in the US, which focuses on high net worth.

The exit strategy for this is Nov 27, right when they come out with their earnings. This is a solid bank, but right now there are too many headwinds. Technically it hasn’t shown a lot of strength. Dividend yield of 4.3%.

(A Top Pick Dec 29/14. Down 6.68%.) Generally he likes the banks, especially those who have good US exposure, which means TD (TD-T), Royal (RY-T) and Bank of Montréal (BMO-T). (See Top Picks.)

Royal Bank (RY-T) or Bank of America (BAC-N)? Look at the economies of both countries and the balance sheets of both stocks. This is a good quality Canadian bank, but he feels the challenge in Canadian banks is that we have a slowing economy. Earnings growth is probably going to be marginal. You will get decent dividend, but that is about it. He would say there is a little more upside in US financials.

Largest bank in Canada, fantastic wealth manager and great franchise. They are targeting high net worth investors in major US cities. It has growth in the US channel and the high net worth channel. He likes the prospects going forward. 4.2% yield. They can manufacture earnings in their wealth management division.

Hold or switch to a US bank? You have to have some Canadian banks and this is one that he would definitely be buying. Doesn’t think the banks are going to give us spectacular growth, but they will give us solid performance. You will see dividend increases going forward.

(Market Call Minute.) You want to have US revenue in any of the Canadian banks that you own, so Toronto Dominion (TD-T) and this one are the ones that you want to own.

(A Top Pick Aug 25/14. Down 2.76%.) Statistically Cdn bank stocks are cheap because of Short selling out of the US. This bank is well ensconced in the US and is going to be beneficial. Credit card and wealth management businesses offer some pretty good opportunities. (See Top Picks.)

This looks good. The banks have kind of been languishing for a while. Concerns he had 9-12 months ago was that the banks had been played out and there would be more stress. We haven’t seen that yet and maybe it is still coming, but he thinks the banks have underperformed a little with the market, and they are fine.

He likes it. They are Canada’s dominant bank. They made some missteps in the US a few years ago but those have been corrected. The markets are worried about them being included as one of the strategic globally systemically important banks and what more stringent capital requirements will be put upon them. It will affect all of the banks.

See his top picks. We are in a period of seasonal strength for banks until December. October is the end of the fiscal year for the banks. We saw a fairly nice bottom pattern recently. We have already seen outperformance against the market. All of the big 5 should do well right up until reporting season. These things are subject to selling on news.

They are all out of favour right now. They were hit during the NA-T equity issue. He thinks they can grow out of their common equity problem and won`t have to raise equity.