Royal Bank (RY.TO)

Canadian banks are quasi-monopolies so you have to have them as Canadians. This one is the largest. He questions its exposure into the world of capital markets, where they have been very, very strong. They continue to do well in this area. Has a great yield and nice growth ahead. A classic core holding that you never really sell. This is one of the top banks in his list.

Caller asked about pairs trade. You cold short BNS and long RY because of Latin American exposure. He would go long a US bank and short a Canadian bank as a pairs trade.

Canadian Banks. Last year they ran well. They became compressed in the spring time because of housing market concerns. We are in the seasonal period for banks and next week is ‘bank week’ when earnings come out. There is still a lot of talk about houses being overvalued. Banks trade off that sentiment to some extent. It put in a couple of small bottoms and is now breaking through so this is a positive sign. Watch it does not roll over.

In the long run Canadian banks have been excellent investments and probably will be. Right now he prefers banks outside of Canada. The biggest driver in Canadian bank earnings has been the consumer. Consumers leverage themselves up in the mortgage business and he feels this has pretty much gone as far as it is going to go. However, US and European banks, which got hit very hard in the financial crisis, are now growing their earnings and dividends faster than Canadian banks. For a long-term investor, this is a great investment.

Wonderful run. RY is the big capital markets bank. Thinks it will split soon.

Any of the banks are difficult to analyze these days. Each bank has its pro and con. This one is a very safe holding. Thinks they are fairly valued now but they are not cheap. There are better stocks out there in terms of finding growth and growth in dividends, but it is a safe Buy at this stage.

Banks. In general have done well. An uptrend and then a pause during last year then an up leg again. These stocks need a pause or pullback right now. The worst thing you can do is get out now. After a dip it will go up fast.

Their strength is in the breadth of their platform. Their businesses are really strong domestically but you could also argue they are a global leader. High single digit earnings growth plus dividend should get you 10% return. You might want to wait for their earnings release.

All the Canadian banks are pretty good. This still has pretty low PE’s relative to the group. Still have a lot of dividend growth. You are seeing stock splits and potential for more. Canadian housing market is not falling apart. Likes this bank’s capital market exposure.

Closed at $71.21 and he has a model price of $74.30, a 4% upside. If it pulled back to something like $67, that would be a great opportunity to Buy. This and the Toronto Dominion (TD-T) are the most highly valued banks on the Canadian market but are actually doing better than the other banks in terms of performance.

Still likes the banks. They have done well and have outperformed the TSX in general last year. All the banks can grow earnings at 6%-8% and will grow their dividends at a similar pace. Of the group, this has one of the highest ROE’s so it trades at a higher price to book, but that is fully warranted given its higher sustainable ROE. Very diversified business mix in terms of retail and commercial banking. Wealth management will do very well with the rise in equity markets. Dividend yield of 3.76%.

He is not a fan of trying to pick banks. Eventually they all do well. Buy the ZEB-T ETF. Yields are roughly the same.

Don’t bet against Canadian banks in the long run. They are a little expensive right here, however. He would favour banks with operations that have more foreign operations. BNS is his preference.

He has been a supporter of the banks right through the bad times earlier this year when people were Shorting, on concerns of real estate. He did not believe them and still does not. He is looking for a 5% capital gain on the banks with this one at about 6% for the next 12 months. Yield is 3%-4%, giving you a 10%-11% real return. (See Top Picks.)

Banks have certainly had a good run here. Trading at a slight premium to the group. Expects there will be strong retail numbers out of them and their capital numbers will be solid. Not sure she would rush into buy it here but in the long-term it is a good play.