Jim Hawthorne

Canadian Banks May Be Risk-Averse, But They're Not Immune

A Very good analysis of what is right about Canadian Banks and the weaknesses of Canadian analysts. Thank you!

While Canada remains dependent on the US economy (and who is not?), Canada has also made strong efforts to de-couple from strict dependence on the US over the last 15 years, with considerable success. The danger is that there has been a 'new' dependency on the Pacific Rim to replace it.

Canadian currency is much more 'resource-industry dependent' than it is dependent upon government programs, policy or manipulation. As go basic materials, so goes the Canadian economy and with it, the Canadian banks. It is a truism that Canada's economy is much less 'Financialized' than that of the US and as such is more independent of the machinations and risks of that sector in the US.

It is also true that while US banks contract and struggle to raise capital, Canadian banks have generally been expanding their global reach and diversification.

Your recommendation to pause until the depth and breadth of the Canadian recession is determined before rushing to invest in Canadian Banks is very timely and reasonable.

Bank of Nova Scotia Is Worth Banking On - Barron's

naidle has sound advice that should be taken most seriously, and bearing in mind that although BNS has made strong inroads into overseas markets (it's stealing market share from the discredited Santander hand over fist in the Caribbean, for example!), BNS is still a Canadian bank in a resource-commodity based economy that is just beginning to discover the myth of 'de-coupling'!

BTW naidle, I'm a fellow Canuck (Sask) now based in Kansas City, MO but wintering in San Juan, PR. Good to hear from you!


On Feb 07 10:04 PM naidle wrote:

> We see a three day rally and it's time to invest in banks? Without
> question Canadian banks are some of the better options (less leverage
> and issue with liquidity) but you can't tell me rising unemployment
> and a slowing economy will benefit a financial institution. Factor
> in the speculative element and pressure from failing banks around
> the world.
>
> The yield is probably safe but I wouldn't go crazy investing in Canadian
> banks just yet (yes, I'm a Canadian).

Bank of Nova Scotia Is Worth Banking On - Barron's

Wide Moat raises some valid questions! (I guess ALL questions are valid around here!)

The Bank of Nova Scotia (BNS T.BNS) has truly followed its own time honored maxim of always choosing to err on the side of prudent conservatism. While some other Canadian banks have been scalded (as opposed to being deep-fried), BNS has followed good lending practices and avoided the derivatives 'time bomb' through very limited exposure.

While the price of BNS stock has been stung by the overall swan-dive of the Financial Sector, and is down by ~45% since 6/29/07, about the same as WFC, it has the advantages of clean balance sheets come the recovery (let's hope 'when', not 'if').

Further research available at URLS below:
stockgroup.financialpo...
www.hotstocked.com/com...
investdb.theglobeandma...
www.theglobeandmail.co...
stockgroup.financialpo...

Hope this helps!

On Feb 07 07:43 PM Wide Moat wrote:

> Sounds like a sure thing, so what's the catch? Any derivatives book?
> Any proprietary trading desks?
>
> Also, if they aren't loaning to the United States, who's taking the
> money? Canadians? For houses? Inquiring minds must know.