Opinions
Chris Blumas
Toronto Dominion
TD-T
BUY
Oct 16, 2024
Stock price when the opinion was issued
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Likes TD a lot. Very undervalued at 10x PE. Potential for multiple to rerate in medium term. More upside as it distances itself from the overhang of regulatory infractions. All that should give you a better total return. He'd pick TD.
For BAC, even with deregulation in US, the big banks are already so large, it's hard to imagine they'd be allowed to get even bigger.
Asset cap in US will be in place for a number of years; once it's eventually lifted, that will be an avenue for growth. US accounts for about 25-30% of earnings. Bank feels it can still grow in Canada. Valuation still quite attractive at 10x PE. Path back to growth will take a while. Yield is quite attractive too.
Q1 was a much-needed low-drama quarter. Schwab sale. Market appreciated the quicker CEO transition. Wealth management good, strong capital markets. Still trading at a premium to the group, and that's not warranted because of growth limits in US.
All banks are at risk if economy darkens. But if economic environment is OK, he thinks BMO has the best upside.
Was a screaming buy back at $78. Likes its Canadian banking business. Sold Schwab, redeployed proceeds back into Canada. Now at $90, she'd be hesitant to go into any bank right now before earnings. Suspects all banks will need to increase credit provisions. Wait to see plan for growing in Canada.
Over the very long term, it and RY are the 2 premier Canadian banks, so she'd be OK paying a premium to own.
Won't be an immediate fix, but remember that the market is a forward-looking, discounting mechanism. Q2 earnings results were much better than expected. Biggest segment is Canadian personal and commercial banking, and that missed expectations. Sizeable outperformance in US retail, strong outperformance in wealth management, did very well in capital markets.
Most over-capitalized bank in Canada. Will be buying back a lot of stock. Working hard to remediate money-laundering deficiencies in US. All its plans should help to rebuild investor confidence and restore its premium multiple.
The company is recovering from its US indiscretions, and recent earnings were good. Credit quality remains good, and recent cost-cutting efforts may help offset any potential economic weakness. The stock remains cheap with a good, secure dividend.
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It's the best Canadian bank performing so far this year, but the worst in 2024. Their US problems are not yet behind them (they have to work through the asset cap, part of the penalty for money laundering). They have limited growth in the US, but also won't need capital to grow. So they could buy back shares. TD trades at a discount, so he likes this for the long term.
In a tough spot, media has made it the whipping boy. Every single US bank has problems with money laundering, it's so pervasive. The fine came at the best time, as it was sitting on the most capital of any Canadian bank. Everyone knew what was coming, stock's been drifting lower for quite some time.
He owns it for the income, not the growth. He'd plug your nose and buy here, knowing it could go a bit lower. No one wants it on their books so there's been indiscriminate selling, which creates the value for you.
Compare this to WFC, which was in a whole heap of trouble due to problematic sales practices. Return since then is ~150%. The TD scenario is different. In these mature type of businesses, you'll get your dividend and a small bit of earnings growth. TD now has the lowest multiple of any Canadian bank, but will that be the case in 5 years? They all re-rate, and he thinks this will end up being quite a good return.