Three of Canada's largest banks, driven by domestic growth, have soared in the stock market this year on a spate of acquisitions, while lenders with global...
TORONTO - Three of Canada 's largest banks, driven by domestic growth, have soared in the stock market this year on a spate of acquisitions, while lenders with global ambitions have sagged on rising costs in foreign markets.
"It's really a question of more risk appetite. The expansion within Canada, the east-west expansion, is a much lower risk proposition" than growth south of the border, said Ben Jang, a portfolio manager at Nicola Wealth, which holds shares in TD, RBC and CWB. However, the southward drive has encountered roadblocks. TD has been plagued by U.S. regulatory probes into its anti-money laundering program, and RBC Capital Markets analysts in July flagged faster credit deterioration at BMO than its U.S. peers.Scotiabank last year laid out a plan to focus on the North American corridor. Its stock fell 3.4% on Monday after it announced a surprisingly aggressive move to buy a 14.9% stake in U.S. bank KeyCorp.
RBC and National Bank trade at 12 and 11 times forward earnings estimates, respectively, indicating higher growth expectations over the next 12 months than TD's 9.5 and Scotiabank's 9.2. BMO and CIBC have a forward price-to-earnings ratio of around 10 times.The S&P 500 banks index, which tracks the largest U.S. banks, has jumped nearly 16% this year.
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