Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

The Bank of Nova Scotia (USA) (BNS), Bank of Montreal (USA) (BMO): It’s Hard to Go Wrong With Canadian Banks

Page 1 of 2
Bank of Montreal (USA) (NYSE:BMO)s are safe organizations because they have a lot of capital to justify your investment, U.S. banking analyst Meredith Whitney told the Business News Network. However, a few U.S. hedge funds have actually shorted Canadian banks.
So, is now a time to put your money in Canada? After all, Canada’s banking sector is heavily regulated, and free from much of the recession-related turmoil and utter hatred still targeted at many of the American banks. Let’s take a look at what the top three Canadian banks have to offer, and where they fail.

Bank of Montreal (USA) (NYSE:BMO)

RBC weighted heavily on investment banking

Royal Bank of Canada (NYSE:RY) is the country’s largest bank and boasts of $86 billion in market capitalization. The bank operates in the broadest geographical area, and covers many banking-related needs, such as wealth management, securities trading, and insurance. The company had a net interest income after loan loss provision (bank revenue) of over $11 billion last year, which is an increase of over 30% from 2009 when it had just over $8.5 billion.

The bank expects increasing demand for loans due to the financial recovery. That’s an area that makes up a major part of the company’s revenue. Investment banking accounted for 23% of the firm’s income last year, and that’s set to rise. In fact, the bank is already experiencing a decrease in nonperforming loans and an increase in loan loss reserves. That is a surefire indication that the bank is being paid back, with interest in hand. With that in mind, investors also need to consider the low interest rates that affect margins. However, RBC has managed to average 17% annual returns over the last 10 years.

BNS looks to grow abroad

Emerging markets is the name of the game for The Bank of Nova Scotia (USA) (NYSE:BNS). The company (which is also referred to as Scotiabank) boasts of exposure to India, China, and Brazil. In fact, international exposure represented 18% of the firm’s earnings growth last year, and 50% of the profits came from overseas. Net interest income after loan loss provision was $8.7 billion last year and $6.5 billion in 2009, representing 33% growth, 3 percentage points higher than RBC.

The firm has been growing at a fast pace, with an aggressive acquisition strategy that aims to diversify the company, an area that it lacks when compared to RBC. The majority of that diversification has been in several countries, though each investment is relatively minor compared to RBC’s activity.

When it is in each of these countries, it waits for an acquisition opportunity, which doesn’t always pay off. For example, if a country nationalizes foreign banking assets, The Bank of Nova Scotia (USA) (NYSE:BNS) could get burned, which is exactly what happened about 10 years ago in Argentina.

Scotiabank is also diversifying digitally after its recent acquisition of ING Bank of Canada’s online banking operations. That increased CAD $40 billion of assets and CAD $30 billion of deposits, including 1.8 million customers. This allows the bank to cross sell its products and services, and shows a tremendous amount of growth for its share price.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!