(NYSE:BNS) Canadian Imperial Bank of Commerce(NYSE:CM)
Bank of Montreal (NYSE:BMO)
Solid For Now As a group, they've added $7.3 billion in equity to their balance sheets over the last six months, including $161 million for the Royal Bank in early March - and none has yet to take aid from the Canadian government. In fact, Royal Bank and Toronto-Dominion both have triple-A ratings from Moody's, two of only seven anywhere in the world. They're in good shape as long as the recession ends sometime in 2010. Even the best banks would have trouble surviving another two years like the last two. In terms of actual first-quarter earnings, Bank of Nova Scotia did the best, increasing net income 15% to $842 million with over half generated outside Canada, Mexico and the U.S. It's definitely the most international Canadian bank. The other first-quarter success story was at CIBC, where net income was $147 million, a huge turnaround from a loss of $1.46 billion in the same quarter last year. It seems the sub-prime troubles from its U.S. operations are mostly behind it. The remaining three banks, including the biggest, Royal Bank of Canada, all saw their earnings decline in the first three months of the fiscal year, although profits averaged $662 million, which is nothing to sneeze at. Bottom Line The five Canadian banks' stocks are down an average of 44% in the past 52 weeks. Traditional yields are 3-4%, making their current returns unusually high. Some believe they will cut or suspend dividends in the near future to preserve capital should the economy worsen - hence the lower stock prices. It's a great theory, but one I find very difficult to swallow. You don't stop paying dividends after 138 years of doing so. You just don't. Read Is Your Dividend At Risk ? to learn of several telling factors that can help you answer this question and avoid losses.
A recommendation of Canadian bank stocks.