Royal Bank (RY.TO)

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.

Royal Bank (RY-T), J.P. Morgan (JPM-N) or Bank of America (BAC-N)? A lot of part of 2013 for US banks looked fantastic, especially in January. However, something is going on there. There have been more fines with these organizations. US banks have been struggling. J.P. Morgan is better than most in terms of fundamentals. His target price for this bank is right where it is trading at, but it could go to the $83.40 level. He is partial to the US financials.

Although hitting 52-week highs, you should stay with the banks because they are money making machines. Have all been reporting over the last week or so, and the domestic Canadian market looks very healthy. We are only now starting to get back to where we were in 2007. Having some bonds as well would be a sensible policy.

Hit an all-time high today on stronger-than-expected earnings. Indicative of a franchise that is very profitable. Banking in Canada is generally very profitable. 50% of their earnings come from personal and commercial banking. Wealth management was particularly strong. Earnings growth is likely to be mid-single digits.

Likes the banks generally. They are core long-term holdings. You are not looking for stocks that are shooting the lights out in this particular case. He looks for a decent yield (3.5%) and a consistent 5% growth rate for long-term total returns of 8%-9%. Banks will add stability to a portfolio.

Within financials, banks are his favourite sector. This one is very well-balanced in terms of geographic exposure and its blend between retail, capital markets and wealth management. However, he prefers US banks as he likes their recovery.

One of the great things about Canada is our banking system. In the long-term, it is very hard to do better than the Canadian banks. However, there is always the game of “which one”. He has been in and out of this one over the years. A very solid bank although they didn’t have as good adventure in the US. At the moment Toronto Dominion (TD-T) is his favourite.

It is in an upward trend, trading above its 20 day moving average and outperforming the TSX. Banks are seasonally strong until the end of May with the reporting of second quarter results. Stick with it and buy it on weakness.

(A Top Pick May 7/13. Up 22.76%.) Still likes and likes the banks as a group. Earnings growth is in the high single digits and feels the share price should reflect the earnings growth. Pays a dividend of just over 3% which gives you a 10%-12% total return.

He has 11%-12% total shareholder return over the next 3-5 years. This is estimating what the dividend growth and capital gains will be. Has it with the highest PE of any of the Canadian banks which he feels deserves it.

A very high quality financial institution for a long-term investor. Very well run. Pays a nice dividend. If you are going to Buy and Hold it for a long time, you are not going to go too far wrong. Feels the US banks overall are cheaper on a valuation standpoint and have more earning potential than Canadian banks. Canadian banks are trading between 11 and 13 times earnings while US banks generally trade at 10X and have a better earnings growth profile because they are recovering from a lower base and a big improvement in housing.

He is anticipating a pickup in M&A activity with a shift from bonds to stocks. This tends to be very good, especially for a company like this with their large wealth management component. From 2012 to the present, the chart has had a nice uptrend. It was a consolidation level around the $60 and $70 levels, but it is breaking out. Use $70 as a Stop. He can see this going to $80. Yield of 3.87%.

(A Top Pick April 9/13. Up 26.66%.) Has a nice mix of business. Banks are trading at about 11 or 12 times forward earnings. Earnings growth is going to be in the high single digits so she thinks they can grow their share price at that level. Recently increased their dividends by about 6%.

A great story going forward. 50% in the non-interest spread business. Came off a little recently because of some allegations of mess-ups in the states so now is the time to buy them.