Royal Bank (RY.TO)

Canada's biggest bank. Banks have had really strong growth over the last 10 years due to mortgages. Doesn't see it continuing. Royal Bank has moved to wealth side, but that may not be enough to continue the growth they have had.

Came to an end of seasonal strength at the end of April, when it peaked. Has not done much since then. Jan to Apr is strong for the financials.

Has a strong presence in the personal and commercial lending markets. Thinks the concerns about a Canadian housing crash is overdone. 60% of the market portfolio is insured by CMHC. The remaining 40% has a loan to value ratio below 50% so there is a lot of cushion built in. Attractive PE of 11 times. Yield of 4.09% and she expects this to increase as earnings grow.

Will the hiring of Temp workers to replace long-term workers affect their stock? Doesn’t think it will have that much impact on the stock. Doesn’t affect their operations that strongly. At the end of the day, the retail banking part of any bank’s franchise is very highly profitable and a low risk part of their business. This bank has one of the best franchises of that in Canada. 4.2% dividend yield which he thinks will be back into a lower growth, not like it has been in the past decade.

Everybody is concerned that Canadian real estate is going to impact the banks so valuations are probably lower than they should be. As the quarters continue to go by, he expects there will be more dividend growth and more share buybacks. This one is the most exposed to global capital markets improving and has substantial leverage to wealth management and wholesale, which are good areas to be in right now.

Banks had a nice run but they all pulled back and didn’t really participate in the rally because of concerns on the Canadian housing market. 60% of their residential mortgage loan book is insured. The other 40% has a very long to valuation ratio of 47% so there is a lot of cushion built-in. Very nice diversified revenue stream. Personal and commercial lending is about half of their earnings. Yield of 4.19% which they continue to increase. Trading at about 11X forward earnings, which is very attractive.

Banks are a sector with a very rhythmic pattern. They did peak out when they were supposed and he did sell. You can buy banks back every summer about July or August. Look for a breakout from a consolidation level. He has been out of banks for a month and a half.

Doesn’t feel banks have reached a multiple level where they are overvalued. Growth is going to be muted and won’t be the same as we have seen over the last 2-3 years. All Canadian banks are still reasonable holdings and should be in everybody’s portfolio for a combination of steady growth and decent yield. With the Canadian tax credit, you have to favour Canadian banks over US banks if you are a Canadian shareholder.

Banks have had a big run and have lost momentum recently. Have been some concerns about Canadian economics that have been unfolding. They all reported pretty good numbers and have all had some dividend hikes. Feels they are fully valued. If you own, it doesn’t hurt to take a bit of money off the table.

The largest Canadian bank. Not a huge fan of the banking sector. Won’t show a huge amount of growth. With the government making sure there is not too much growth in the mortgage market there is a slowdown so domestic lending should be very weak. However, this one is particularly well-suited because of their money management, wholesale banking and being in the US. Not cheap.

He buys Canadian banks and just sits with them without selling.

Has not been buying it recently. They traditionally hold a significant valuation premium to others and it has disappeared to a great extent. They have done very smart things over the last few years. Cleaned up issues in the US and are a large player in capital markets and retail banks. Over 4% yield still and a relatively safe place to be.

Still sees a correction risk in the banks. They keep going higher. It is not his forte to buy in when something is as strong as this is. We should still get a correction. To be there now for dividends: ZWB-T. Get into RY on a pull back.

We are still in a strong time frame for banks. Relative Strength Index would suggest this has a bit more to run.

Possibly sell a little bit here or wait for a pullback to buy more. They still have growth in their business. Their numbers came out today and they were very, very good. Canadian banks manage their risks very well. Thinks they will rise their dividends.