The “Big Five” Canadian banks include Royal Bank of Canada, Toronto Dominion Bank (TD Canada Trust), Bank of Nova Scotia, Bank of Montreal and Canadian Imperial Bank of Commerce (CIBC). Are there other viable options?
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Why bank stocks offer better value in U.S. than Canada
– moneysense.ca
The most dramatic difference between the U.S. and Canadian bank stocks comes down to leverage. All of the U.S. banks have smaller leverage ratios, and usually much smaller ones, than the Canadian banks. On average, the U.S. banks have leverage ratios (assets/equity) of 9.0, whereas the average for the Canadian banks comes in at 19.1.
While it could be argued that the Canadian banks have better franchises than the U.S. banks, the leverage that the Canadian banks employ appears to indicate that they’ve not learned enough from the collapse of the U.S. real estate market in 2008.
First up, the following table provides stats on Canada’s bank sector.
Name
Market Cap (M)
Price
P/E
P/B
Yield
Leverage
Royal Bank (RY)
$147,709
$101.33
13.8
2.25
3.59%
18.29
TD Bank (TD)
$137,775
$74.51
14.1
2.05
3.22%
17.87
Bank of Nova Scotia (BNS)
$100,682
$84.00
13.1
1.89
3.76%
16.85
Bank of Montreal (BMO)
$64,444
$99.49
12.2
1.67
3.62%
18.01
CIBC (CM)
$50,435
$114.72
10.4
1.78
4…
