Bloomberg identified the 20 banks they believe to be the financially strongest in the world (Figure 1). We reviewed those banks and selected three as having provided the best historical patterns of dividend growth:
- TD (Toronto-Dominion Bank) - NYSE
- NA (National Bank of Canada) - TSE
- STAN (Standard Chartered) - LSE
All three are non-US banks. One is available on the NYSE and the other two, if purchased, should be acquired on their local Canadian and UK exchanges, not in pink sheet form in the US.
We advise against pink sheets purchases in most cases. That is not to say that we recommend against owning foreign companies whose shares are available in pink sheet form, but that we recommend against owning the pink sheet form of those company's shares. If you want the foreign company, with a few exceptions, it is generally better to own those companies directly on the local foreign exchange if they do not have ADRs listed on a US exchange.
Summary Business Descriptions:
The Toronto-Dominion Bank conducts a general banking business through banking branches and offices located throughout Canada and the United States. The Bank and other subsidiaries offer a broad range of banking, advisory services, and discount brokerage to individuals, businesses, financial institutions, governments, and multinational corporations.
They have about 85,000 employees principally in Canada and the United States. Their business is 49% Canadian personal and commercial retail banking, 20% U.S. personal and commercial retail banking, 20% wealth management and insurance, and 11% wholesale domestically and internationally.
Their credit ratings are: S&P AA-, Moody's AAA, and Fitch AA-.
National Bank of Canada provides a traditional array of banking services, including retail, corporate and investment banking, primarily within Canada. The Bank, through its subsidiaries, is involved in securities brokerage, insurance and wealth management, as well as mutual fund and retirement plan management.
They have been in business for about 150 years, and have about 20,000 employees.
Their revenue is 52% personal and commercial banking, 29% financial markets operations, and 19% wealth management.
Their profits are 51% personal and commercial banking, 38% financial markets operations, and 11% wealth management.
Their credit ratings are: S&P A, Moody's Aa2, Fitch A+.
Standard Chartered plc is an international banking group operating principally in Asia, Africa, and the Middle East. The Company offers its products and services in the personal, consumer, corporate, institutional and treasury areas.
They have been in business over 150 years, operate in 71 countries and have over 1,700 offices and nearly 87,000 employees.
Revenue sources in 2011: Hong Kong 17%, Singapore 12%, Korea 10%, other Asia Pacific 20%, India 10%, Middle East and other South Asia 13%, Africa 8%, Americas/UK/Europe 10%.
Their 2011 revenue was 76.0% wholesale and 24.0% retail. Their 2011 profits were 61.5% wholesale and 38.5% retail.
They have a net exposure to debt from troubled European countries of about 15% of their net worth.
Their credit rating is S&P A+ Stable, Moody's A2 Stable, and Fitch AA- Negative.
Figure 1: The Bloomberg List and Criteria
Figure 2: Bloomberg List with US Exchange Symbols:
We have purposely omitted pink sheets symbols for banks available in the US, because we recommend against such purchases. The local market symbols for all of the banks are provided in Figure 3.
|Name||US Exchange Symbol|
|BOC Hong Kong Holding|
|Canadian Imperial Bank of Commerce||CM|
|National Bank of Canada|
|Royal Bank of Canada||RY|
|United Overseas Bank|
|DBS Group Holdings|
|Hang Seng Bank|
|Banco Santander Brasil||BSBR|
|China Construction Bank|
|Credit Suisse Group||CS|
|PNC Financial Services Group||PNC|
|Bank of Nova Scotia||BNS|
|Skandinaviska Enskilda Banken|
Figure 3: Valuation Metrics and Wright Rating
Wright rating evaluates four parts: Liquidity, Financial Strength, Profitability, and Growth. Explanation of Wright rating available on our blog site.
The bold symbols are traded in the US and are not pink sheet stocks (we recommend against pink sheets stocks as a general rule).
The three selected stocks are shaded in gray.
The valuation metrics are color coded from green through yellow to read (from best to worst). The terms "best" and "worst" are not the same as "good" and "bad" -- just relative rankings.
Figure 4a and 4b: 5-Yr Price, Earnings and Dividend Charts:
Figure 5: 10-Year Dividend Payment History (local currency):
Figure 6: Four Best 10-Year Dividend Histories:
Figure 7: Four Best 5-Year Dividend Histories:
The Price Charts:
The price charts for the three best dividend banks are not very attractive at the moment.
Analyst Consensus Opinions:
Basic Differentiation of Opportunity and Risk:
TD offers a diversified US/Canadian banking and wealth management opportunity.
NA offers a traditional Canadian banking opportunity.
STAN offers an Asian and Middle East banking growth opportunity.
Disclosure: QVM has no positions in any stock mentioned as of the creation date of this article (May 5, 2012).
General Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.