This summer produced some positive news for the Canadian housing market after a tumultuous run stretching back to the spring of 2017. Stabilization is the word of the season, referring to prices that have leveled year over year, while home sales continue to experience weakness in major metropolitan markets like Vancouver and the Greater Toronto Area.
New OSFI mortgage rules introduced in January included a stress test for uninsured buyers that further cooled the real estate climate. According to Mortgage Professionals Canada the new stress test prevented over 100,000 Canadians from purchasing a home in 2018. Policy makers are now moving to make things easier on self-employed buyers by instituting more liberal lending measures that will come into effect in October 2018.
Back in August, I’d discussed why an improving housing market was good news for Canada’s major banks. Several big banks projected that mortgage growth would taper off in the second half of 2018. Fortunately, banks have also benefited from a higher rate environment, which has resulted in improved margins. Let’s take a look at three stocks that could be great holds as we move into the final quarter of the year.
Royal Bank of Canada (TSX: RY)(NYSE: RY)
Royal Bank stock has climbed 4.8% over the past three months as of close on September 5. Shares are up 1.1% in 2018 so far. The bank released its third-quarter results on August 22.
Net income in its Personal and Commercial Banking segment rose 8% year over year to $1.51 billion. This gain was powered by higher margins and average volume growth of 5%, which was driven by good growth in Canadian residential mortgages and commercial lending. Expected loan losses increased 22% from the prior year to $338 million, which the bank attributed to accounting changes.
Royal Bank stock also offers a quarterly dividend of $0.94 per share, representing a 3.5% dividend yield.
Laurentian Bank (TSX: LB)
Laurentian Bank stock has plunged 8.8% week over week as of close on September 5. Shares are down 22.8% in 2018. The bank was forced to deal with a crisis over its mortgage underwriting practices that emerged in late 2017 but has assured investors that it has been resolved as of the end of the second quarter.
Laurentian released its third-quarter results on September 4. Profit was mostly static year over year as higher revenues were offset by acquisition-related costs and higher expenses. It also reiterated that its mortgage loan portfolio review was completed with no negative impact to its customers.
Laurentian stock offers a quarterly dividend of $0.64 per share, representing a 5.8% dividend yield.
Toronto-Dominion Bank (TSX: TD)(NYSE: TD)
TD Bank stock has climbed 4.7% over the past three months as of close on September 5. Shares are up 6.9% in 2018. The bank released its third-quarter results on August 30.
TD’s Canadian Retail banking segment posted net income of $1.85 billion, which was up 7% from the prior year. Its retail segment managed to increase its market share in the real estate secured lending business while also posting improved margins. The bank declared a quarterly dividend of $0.67 per share, representing a 3.2% dividend yield.
