Here’s Why Canadian Banks are Stronger Investments than US Banks
Canadian banks outnumbered American banks (NYSE:XLF) in a list of the world’s strongest banks published by Bloomberg Markets and featured by ft.com alphaville, a website of the Financial Times of London. Five Canadian banks– National Bank of Canada, Canadian Imperial Bank of Commerce (NYSE:CM), Toronto-Dominion Bank (NYSE:TD), Royal Bank of Canada (NYSE:RY) and Bank of Montreal (NYSE:BMO) outnumbered US and UK banks in the top 20 list.
Canadian banks are rated nos. 3 and 4 of the 20 (non-performing assets, i.e., bad loans – are a very small % of total assets)– while the highest rated US bank, Fifth Third of Cincinnatti, Ohio (NASDAQ:FITB) – not a major major money-center bank, ranks no. 7. JP Morgan Chase (NYSE:JPM), the most well known and widely held US bank, ranks 14th, troubled Citigroup (NYSE:C), 16th.
A perfunctory peek at their common stock valuations is seductive, as some of the Canadian banks have a worthy dividend yield in a currency that at times in the past year or so has acted far better than the US dollar. Toronto-Dominion (NYSE:TD) sells at 11 times earnings and yields 3.35%; Bank of Montreal (NYSE:BMO) is selling at 10 times prospective earnings per share and yields 4.63%. Canadian Imperial Bank of Commerce (NYSE:CM) is yielding 4.28% and trading at 15 times earnings while Royal Bank of Canada (NYSE:RY) is paying a 3.28% yield and selling at 15 times earnings.
And the pleasant kicker is that the Canadian dollar (NYSE:FXC) may just remain more stable and attractive a currency to own if the dollar (NYSE:UDN) keeps descending. Keep that in mind– and you might want to find a Canadian ETF (NYSE:EWC) that will reflect the currency’s strength.
Robert Lenzner writes the StreetTalk column for Forbes.com.