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

A worker uses a double monitor computer screen in an office.
Dividend Stocks

2 of the Best Canadian Stocks That Pay Out Monthly

These two Canadian dividend stocks are some of the best to buy, offering yields upwards of 5.4% and returning cash…

Read more »

Oil pumps against sunset
Energy Stocks

Suncor Stock: How Low Could it Go in 2023?

Suncor (TSX:SU) is up on the back of a bounce in oil prices but remains out of favour. Can new…

Read more »

clock time
Dividend Stocks

How Investors Can Build a $1 Million Portfolio in 12 Years

If you can handle it, you can certainly create a million-dollar portfolio in just 12 years, especially considering this dividend…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Passive-Income Seekers: 4 Safe Dividend Stocks to Own Beyond 2033

Dividend stocks are great, but only if they continue to perform after downturns as well. In the case of these…

Read more »

stock analysis
Tech Stocks

Investing in AI: 1 Cheap Tech Stock Poised for Growth

Docebo is a little-known Canadian tech firm that's unlocking the power of next-generation AI technologies.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

4 Big Dividend-Paying Stocks for 2023

These four stocks all earn strong cash flow and offer attractive dividend yields, making them some of the best to…

Read more »

A airplane sits on a runway.
Investing

1 Growth Stock Down 40% to Buy Right Now

This Canadian stock has years of growth potential, and considering the significant discount it trades at now, it's a top…

Read more »

grow dividends
Dividend Stocks

This 7.5 Percent Dividend Stock Pays Cash Every Month

If you need cash now, this dividend stock is certainly one I would consider that could double in share price…

Read more »