Canadian Banks Remain Amongst World’s Strongest

Canadian banks still “got it” according to Bloomberg.

| More on:
The Motley Fool

With bank earnings on the brains of many Canadian investors this week, let’s take a quick look back at Bloomberg’s World’s Strongest Banks report that came out earlier this month.

Based on fiscal 2012 results, Bloomberg ranked the world’s banks that exceeded the minimum asset threshold of $100 million.  Aside from the minimum asset level, the other variables considered in a weighted calculation were:

  • Tier 1 capital vs. Risk Weighted Assets
  • Nonperforming assets vs. Total assets
  • Efficiency – cost vs. revenues

Six of Canada’s biggest banks met the minimum asset threshold, and 5 of the 6 made it into the top 20 based on a combination of the variables above.  Four appeared in the top 10.  CIBC (TSX:CM), RBC (TSX:RY), Scotia (TSX:BNS), and TD (TSX:TD) ranked 3rd, 4th, 7th, and 8th respectively.

Scotia was the bank that marked the biggest improvement, moving up from 18th last year.  Royal also improved and TD fell.

The report goes on to indicate that revenue and loan growth for the entire Canadian banking sector is expected to slow as this country’s household debt-to-income ratio had climbed to a stratospheric 167% at the end of 2012.

It’s hard to figure how consumer debt can move materially higher from this level, without credit quality and/or prudent lending practices being sacrificed.  Without a tailwind from Canada’s retail lenders, the banks will have to look for other sources to fuel growth in the coming years.

Topping the list was Qatar National Bank (QNB), which has grown to become the largest lender in the oil rich Middle East, and one of the region’s most profitable banks.

This was QNB’s first appearance in the ranking as it finally crossed the minimum asset threshold of $100 billion.

Foolish Takeaway

It’s important to realize when you come across a ranking like this that it’s backward looking.  Fiscal 2012 results and a minimum asset threshold were all that went in to spitting out the list of 78 that Bloomberg produced.  A consistent showing however by the Canadian banks certainly indicates their reputation on the global stage remains in-tact.

With their reputation in-tact, the banks will continue to be a go-to source of income for dividend investors both here and abroad.  It’s important however to have some diversification in your portfolio.  A concentrated bet on these dividend payers could have dire consequences.  The Motley Fool’s Special Free Report13 High Yielding Stocks to Buy Today” is a perfect way to diversify your portfolio’s income stream.  This report is sure to have you rolling in dividend cheques from a variety of sources before you know it!  Simply click here and we’ll send you this report – FREE!

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler does not own shares of any of the companies mentioned at this time.  The Motley Fool has no positions in the stocks mentioned above.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

Stock analysts were once excited about construction company Aecon as an investment.

Bull or Bear: Why Analysts Changed Their Tune on Aecon Stock

Analysts had been champing at the bit for the construction company, but the tides have turned.

Read more »

Specialty Brands faces higher raw materials costs.
Dividend Stocks

What’s Next for Premium Brands Stock?

Shares of the specialty food production and distribution company have fallen about 25% since last October.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

2 Interesting Buys in Any Market

Here are two intriguing buys in any market climate that offer defensive appeal as well as growth and income earning…

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Should You Buy Bank Stocks Now?

Canadian bank stocks are getting cheap. Is this the right time to buy?

Read more »

stock data
Stocks for Beginners

2 Reliable Stocks Beginners Can Buy Amid the Market Selloff

As the broader market turmoil continues, new investors can buy these two reliable dividend stocks to get good returns on…

Read more »

Biotech stocks can be good yet risky investments.

Is Bellus Health Stock Still a Buy After 30% Earnings Jump?

The biotech continues to make progress on obtaining FDA approval for its chronic-cough therapy.

Read more »

Dividend Stocks

TFSA Investors: 3 TSX Stocks for Tax-Free Passive Income

These Canadian corporations have strong visibility over future earnings and dividend payouts.

Read more »

Piggy bank next to a financial report

Do You Have Cash Sitting in Your TFSA? Now Is a Great Time to Buy Stocks

If you have cash in your TFSA that you're looking to invest, now is a great time to buy high-quality…

Read more »