Investing

Why are bank stocks not recovering as economy begins to reopen?

  • Last Updated:
  • May 28th, 2020 11:53 am
Deal Addict
Oct 21, 2014
1666 posts
2240 upvotes
Burlington, ON
jaysdt wrote: yes, there will be a segment of people who will make the right decisions, but please don't compare a random RFD poster to someone that has their PHD/ivey undergrad. in addition, looking at trailing earnings tells you nothing about what's happening now or the future. anyways i'm not here to dissuade you; i initially asked to see if you had a cogent investment thesis instead of a cursory glance at the company. to be clear i'm neutral on banks and neither bullish/bearish, but see them having a hard time beating the index (take a look at the breakdown of total return if you haven't). take it for what it's worth - this is what i do for a living and my US institutional trade desk contact just emailed me this "Tech still holding on pretty well all things considered but Financials and Energy action is gross as the losers keep losing. Look at Fins /Energy. Bottom today, bottom YTD and furthest away from their 200 day moving averages ". keep in mind that this was his day to day commentary - hope this helped and have a nice day.
Thanks for sharing your knowledge and what your team member said, I will certainly consider it.
Deal Addict
Mar 22, 2012
2116 posts
374 upvotes
Toronto
Millions are out of a job and many businesses closing. At the same time, debt levels are the highest it's been. Could be big losses for banks if many can't pay their loans.
Deal Addict
Jul 23, 2007
4680 posts
3604 upvotes
Geez you don't need a university degree to buy the common shares of a bank stock. I don't have any uni and I've been doing fine for the last few decades with the investments. Too many investors only focus on recency, and what has been doing well over the last little while. The major Canadian banks have been survivors in one form or another since the 1800's. Somehow or other they managed through the Great Depression along with two world wars over the last century. Personally I could care less whether my portfolio beats the Canadian market or not. I just keep focused on the income it generates year after year.

Fifteen years in retirement now, including the past financial crisis and the dividend income seems to keep going up most years. Part of it from investment of savings and reinvestment of dividends and the rest from dividend growth. If I get a dividend yield higher than inflation then I know I've already got a head start. In the good years, I also get the added bonus of portfolio dividend increases growing faster than inflation.
Jr. Member
Jan 30, 2020
146 posts
184 upvotes
I bought puts on td. Banks are going much much lower. Massive loan losses are coming. After that they have a decade low interest rates.
Deal Addict
Mar 22, 2012
2116 posts
374 upvotes
Toronto
Stryker wrote: Geez you don't need a university degree to buy the common shares of a bank stock. I don't have any uni and I've been doing fine for the last few decades with the investments. Too many investors only focus on recency, and what has been doing well over the last little while. The major Canadian banks have been survivors in one form or another since the 1800's. Somehow or other they managed through the Great Depression along with two world wars over the last century. Personally I could care less whether my portfolio beats the Canadian market or not. I just keep focused on the income it generates year after year.

Fifteen years in retirement now, including the past financial crisis and the dividend income seems to keep going up most years. Part of it from investment of savings and reinvestment of dividends and the rest from dividend growth. If I get a dividend yield higher than inflation then I know I've already got a head start. In the good years, I also get the added bonus of portfolio dividend increases growing faster than inflation.
Banks will be fine in the long term but he's referring to short term.
Deal Addict
Nov 9, 2013
4543 posts
4827 upvotes
Edmonton, AB
Stryker wrote: Geez you don't need a university degree to buy the common shares of a bank stock. I don't have any uni and I've been doing fine for the last few decades with the investments. Too many investors only focus on recency, and what has been doing well over the last little while. The major Canadian banks have been survivors in one form or another since the 1800's. Somehow or other they managed through the Great Depression along with two world wars over the last century. Personally I could care less whether my portfolio beats the Canadian market or not. I just keep focused on the income it generates year after year.

Fifteen years in retirement now, including the past financial crisis and the dividend income seems to keep going up most years. Part of it from investment of savings and reinvestment of dividends and the rest from dividend growth. If I get a dividend yield higher than inflation then I know I've already got a head start. In the good years, I also get the added bonus of portfolio dividend increases growing faster than inflation.
"Simple, but not easy."
Keep calm and go long
Deal Addict
Jul 23, 2007
4680 posts
3604 upvotes
johanscott wrote: Banks will be fine in the long term but he's referring to short term.
Yes, but I don't think short term when it comes to common stock investing. Never have, especially since all my individual Canadian equities including the banks are in a taxable account. In the meantime, I recognize the investment world has changed and I'm certainly not prone to selling a stock now because a company has cut or suspended it's dividend like I would in a bull market. I'll certainly be a witness to what the Canadian banks do, or not do moving forward.
Deal Addict
Mar 22, 2012
2116 posts
374 upvotes
Toronto
Stryker wrote: Yes, but I don't think short term when it comes to common stock investing. Never have, especially since all my individual Canadian equities including the banks are in a taxable account. In the meantime, I recognize the investment world has changed and I'm certainly not prone to selling a stock now because a company has cut or suspended it's dividend like I would in a bull market. I'll certainly be a witness to what the Canadian banks do, or not do moving forward.
No one would suggest to buy stocks short term but he's asking why it's not going up in the short term.
Deal Addict
Jul 23, 2007
4680 posts
3604 upvotes
treva84 wrote: "Simple, but not easy."
I don't know Trev. I found my first downturn kind of scary back in 1987, especially since the major newspapers at the time were comparing the market to the 1929 - 1932 collapse. Except for one major brain failure in the late 90's buying a few of the tech stocks that the masses were craving, it's since been more like what do the majority of stock investors not like now. Even though it may be down, is there a dividend and does it look like the company has a future? If I can answer yes to that question, then I may buy or add to what I already have. Not too much in any one sector/industry. Other than that, really I don't find it all that difficult.
Deal Addict
Jul 23, 2007
4680 posts
3604 upvotes
johanscott wrote: No one would suggest to buy stocks short term but he's asking why it's not going up in the short term.
Well that's just the way markets work. Even in a bull market there's always sectors doing well, while others are lagging. Not any different from what we're seeing in this bear market. Most of the market commentators in the media will tell you why, but after you listen to it over a few decades you begin to realize that it's mostly just useless information.
Deal Fanatic
Aug 17, 2008
7391 posts
7589 upvotes
LOL, @Stryker you have too much "experience." Everyone on RFD likes to look at inconsequential details or details that the management should be entrusted to do. People are debating how to redesign commercial usage for Bruce Flatt. :facepalm: I bet some would call up Dave McKay to tell him how to run RY if we posted his #. The only international Canadian bank. Diversified business lines whether you go globally East/West or North/South. See who are in the top ten of the league tables? Then think about all the global banks who are not!

This month has been a bonanza for Cdn covered bond issuance. Why? Because international investors have done their homework and like the assets. They did in 2008/9 and they do now.

For the rest, time for you to figure out your pain threshold or move on.
Images
  • League Tables 30Mar20 p1.JPG
Deal Addict
Mar 22, 2012
2116 posts
374 upvotes
Toronto
Stryker wrote: Well that's just the way markets work. Even in a bull market there's always sectors doing well, while others are lagging. Not any different from what we're seeing in this bear market. Most of the market commentators in the media will tell you why, but after you listen to it over a few decades you begin to realize that it's mostly just useless information.

Well that's his question and that's what people are trying to explain.
Deal Guru
User avatar
Sep 21, 2007
10633 posts
8636 upvotes
Winnipeg
kasm wrote: Small business bankruptcy is still yet to be completely unveiled.
People with no emergency funds may default on mortgage payments in the next couple months before the economy and jobs recover.
Housing bubble may burst as well.
People not spending - Cash is king, so credit card debt is declining. Credit card balances are a huge profit center for banks.

Keep bank stocks for dividends, but don't expect any capital appreciation any time soon.
yeah.. there's no way bmo is going back to up 72 anytime soon.. I'm holding just for the Dividends.. I think they get paid soon.. friday?

If you're a Div investor.. this is pretty good for you thought to get in a low prices...
"An essential aspect of creativity is not being afraid to fail." -- Edward Land
Deal Addict
Nov 9, 2013
4543 posts
4827 upvotes
Edmonton, AB
MrMom wrote: LOL, @Stryker you have too much "experience." Everyone on RFD likes to look at inconsequential details or details that the management should be entrusted to do. People are debating how to redesign commercial usage for Bruce Flatt. :facepalm: I bet some would call up Dave McKay to tell him how to run RY if we posted his #. The only international Canadian bank. Diversified business lines whether you go globally East/West or North/South. See who are in the top ten of the league tables? Then think about all the global banks who are not!

This month has been a bonanza for Cdn covered bond issuance. Why? Because international investors have done their homework and like the assets. They did in 2008/9 and they do now.

For the rest, time for you to figure out your pain threshold or move on.
I got Flatt on speed dial. McKay is coming over for dinner as soon as the restrictions are lifted as well. Smiling Face With Sunglasses
Keep calm and go long
Sr. Member
Sep 29, 2007
725 posts
229 upvotes
All the bank charts look awful here so big time downside coming. BNS at Oct 2006 lows lol
Deal Addict
May 12, 2004
2916 posts
396 upvotes
Mississauga
Most banks reporting end of May, is that how quickly we could see stocks drop lower for banks or will they likely report a massive profit for last quarter as well
Deal Fanatic
Oct 7, 2007
9044 posts
4883 upvotes
johanscott wrote: Millions are out of a job and many businesses closing. At the same time, debt levels are the highest it's been. Could be big losses for banks if many can't pay their loans.
Unless times have changed, my experience in corporate finance has shown me that banks never lend money to businesses that is at risk. They will only lend when the funds loaned can be secured against something. Even if the business appears to be successful and showing strong financial position. So while the banks may not make as much profit if people can't repay their loans, I think that most small business loans are secured against valuable assets and/or a personal guarantee of some sort. In terms of credit card risk which is typically unsecured, banks probably make lots of money on the interest BUT will suffer a loss if people default on their credit card payments.
Jr. Member
Jan 30, 2020
146 posts
184 upvotes
choclover wrote: Unless times have changed, my experience in corporate finance has shown me that banks never lend money to businesses that is at risk. They will only lend when the funds loaned can be secured against something. Even if the business appears to be successful and showing strong financial position.
You must have been born after 2008. Our backs are going to get smashed.
Sr. Member
Jun 19, 2017
576 posts
913 upvotes
Way too much uncertainty with Banks right now. They've relied too heavily on shrinking PCLs to drive earnings growth in the past. The scale and speed of the uptake in mortgage deferrals has been staggering, shows a lot of so called "prime" borrowers were actually living on the edge. Add to that possible permanent job losses, declining asset prices, a hurting energy sector, etc, we may all be underestimating the size of the losses these banks may be facing. Their provisions to this point have been a joke.

Just look at 10 year European bank charts to see how they've been coping with negative interest rates, its pretty hard to find one that isn't down 70%,

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)