Canadian banking stocks underperform after strong quarterly reports by banks

The latest quarterly reporting season for six largest Canadian banks, when they reported for the quarter ending January 31, was so good across the board that it has been called “sunny”, “winning”, “stand-out” and other superlative epithets. Such banks as TD, BMO and RBC saw their quarterly net incomes grow by around 10% from year ago.

However, these results have generally not lead to the strength in the performance of financial stocks. Over the period since the beginning of reporting up until now, the S&P/TSX Capped Financial Index has been rather flat, some bank stocks have been down following reported upbeat financial results.

S&P/TSX Capped Financial Index Source: web.tmxmoney.com

Bank stocks seem to be victims of the current trend of increased volatility on the North American stock markets and the general underperformance of Canadian stocks – the S&P/TSX Composite Index is now down 3% year-to-date, while the S&P/TSX Capped Financial Index is doing only slightly better – it is down around 1%.

But some experts believe that Canadian banking stocks will be among the first to recover when the market turns up because of the banks’ strong fundamentals. The era of low interest rates seems so be over and higher rates should support banks’ bottom lines and dividends as big banks are among prime dividend payers in Canada.

Ukrainian Credit Union Limited