Bank of Canada senior deputy governor Carolyn Wilkins spoke at an International Monetary Fund panel in Washington on October 11. In her speech, Wilkins warned about high household debt, especially among younger Canadians, and lower income. Though the speech touched on a number of alarming issues, she reiterated the strength of the Canadian banks to withstand any major shocks. Wilkins credited the Canadian banking system as well as the high liquidity and capital levels of the major banks.
After two rate hikes, bank stocks have been on a major run that began after earnings season in late August. After the IMF adjusted its forecast for Canada to lead the G7 in growth once again in 2018, could Canadian bank stocks still be a bargain? Let’s take a look at three today.
Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) stock has climbed 5.5% month over month as of close on October 11. Bank of Nova Scotia released its third-quarter results on August 29. Net income climbed to $2.1 billion from $1.9 billion in Q3 2016, revenue was also up to $6.89 billion from $6.58 billion. Canadian and international banking was up 12% and 16%, respectively. CEO Brian Porter also announced a dividend hike of 7% to $0.79 per share — a 3.9% dividend yield.
With Canada leapfrogging other G7 countries, Bank of Nova Scotia can also boast a significant stake in emerging markets, including a footprint in Brazil, China, Taiwan, and many others that also received a projection boost from the IMF in its recent report.
Shares of Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) have climbed 6.2% month over month. In September, CIBC announced that it would expand its brand across the U.S. as the recently acquired PrivateBank would be reoriented as CIBC locations.
CIBC released its third-quarter results on August 24. It saw adjusted net income rise to $1.16 billion from $1.07 billion in Q3 2016. Canadian personal and commercial banking climbed 8% to $719 million. Adjusted net income in wealth management was $136 million — a 10% increase. The stock offers a dividend of $1.30 per share, representing a 4.6% dividend yield.
Shares of National Bank of Canada (TSX:NA) have been on an absolute tear over a three-month period. The stock has increased 11.6% since July 11. On October 11, National Bank announced that it would join the SecureKey Technologies network in an effort to shore up privacy and security. Private and public enterprises have been working furiously to combat cybercrime after a plethora of major attacks in 2016 and 2017.
The bank released its third-quarter results on August 30. Net income climbed to $518 million compared to $478 million in the third quarter of 2016, driven by growth across a variety of its sectors. Personal and commercial banking saw net income climb 21%, wealth management 31%, and financial markets 8%. The stock boasts an attractive dividend of $0.58 per share, representing a 3.8% dividend yield.
Should you still be buying bank shares in October?
With the next round of earnings set to be released in late November and early December, investors have their sights on the October 25, 2017, Bank of Canada rate decision. I expect a dovish decision and a boost to bank stocks before the next round of earnings.
