A TD sign on a post outside the TD Terrace building at Front St. West and Simcoe St. in Toronto’s Financial District on Mar 4.has gained about 22 per cent. Canadian banks are either down or have single-digit gains. Why is this happening, and what will it take for Canadian banks to move higher?
There are several reasons for this, he said. A year ago, U.S. banks were trading at lower valuations than the Canadian banks. But thanks to the resilient U.S., U.S. banks have enjoyed stronger growth in earnings per share, driven by rising net interest income, solid loan growth and strong capital markets for the largest banks.
“In our view, analyst estimates for credit losses for next year – 2025 – are quite conservative and include continued reserve builds, which is a big assumption given that total allowances for credit losses have risen for seven consecutive quarters and are currently approaching highs reached during the COVID-19 pandemic,” he said.
I don’t think you need to sweat this too much. If you had 12 per cent of your portfolio in a single stock, that would qualify as risky. But having 12 per cent of your portfolio in a broadly-diversified ETF doesn’t raise any red flags for me.