Royal Bank (RY.TO)

Likes the earnings report that they came out with last Friday. A global leader. They’ve laid out a game plan where 50% of the business should be domestic and 50% should be global. Also, 50% should be in wealth management and 50% in other traditional banking areas. That sets a model for other banks. Yield of 3.7%.

Came out today with good numbers, but a bit of slowing on the Canadian retail business. Also, wealth management was a little bit light relative to expectations, which is an area that you want to see grow consistently over time. Also, there was a little slowing on the lending side.

Does a larger market capitalization over a smaller bank slow its growth? Generally that is correct. The larger the company, the harder it is to generate growth, but in banking it is not necessarily a huge detriment. In fact, people feel more comfortable with larger financial institutions. She likes this banks mix of business better than other banks.

Canadian banks have been a great place to be for a long time. Canadian banks are amongst the highest valuation banks globally on a BV basis. As a deep value investor, he is not in a hurry to get into things after they have been trading at all-time highs. He has to buy on a pullback, even though it looks like there is never going to be a pullback.

The banking industry in Canada is in great shape. They are probably at the higher end. Trading at 2X Book. Very good dividend yields. These are great businesses to own, and much more stable than people think.

New CEO on Aug 1^st. Do you think he is going to bring about any significant changes in direction for the bank? If it isn’t broke, he doesn’t know why anyone would make any changes. Thinks there is corporate culture in a lot of successful companies. A lot of things are sacrosanct and making changes would be a problem.

Banking operation is almost entirely Canadian, but its US operation is more in the investment banking/wealth management area.

All the banks have had a major base building and a major beginning of an uptrend. However they are all extended and a little pause would provide a better buying opportunity at around $75.

There are 2 periods of seasonality for the banks. One is from October until December, when it takes a bit of a break, and then February until April each year. Great chart. Shows an upward trend. Trading above its 20 day moving average. Strength relative to the market is positive.

On average, the Canadian banks have low upsides. He prefers US banks. Canadian banks are in fine shape and will go to valuation highs.

High quality bank and it screens well. Pays a nice dividend.

(Top Pick Jun 12/13, Up 32.60%) Stronger in insurance and wealth management and doing well in the UK, firing on all cylinders and the dividend keeps going up: 3.8% yield at current levels. Not looking for significant appreciation from here, but a favourite bank at this point.

(RY.PR.I-T). 3.52% Series AJ Preferreds. This has gone down while the rest of the bond market has gone up. This is symptomatic of the preferred share market overall. This is a Rate Reset, and just had a reset in February at 3.52% for the next 5 years. Because of a change in bank regulations, there is a very high likelihood that this will be taken out in 2019, which makes it a five-year investment.

He was pleasantly surprised by their second-quarter earnings that just came out in the last couple of weeks. This is right at the top of his list in terms of favourite long-term bank holdings.

Likes the earnings. About half their earnings are coming from lending, commercial and residential credit with the balance coming from wealth management and capital markets. They all had very strong results. It has lagged the other banks, which it shouldn’t have. Trading at about 11.5X forward earnings. ROE is consistently the highest among the banks. Earnings are going to grow in the 8% range. As earnings growth continues, she expects it will increase the dividends at that pace. 3.5% dividend yield.