Canadian banks, long viewed as a steadier, more conservative
than their U.S. rivals, have started reporting results for fiscal
2012, which ended on October 31. At least one research firms sees
opportunities among the group for investors.
In a recent research note, S&P Capital IQ looked at five
Canadian banks, including Royal Bank of Canada (NYSE:
), which reported results last week. The research firm has a
three-star rating on Royal Bank of Canada and a four-star rating
on Bank of Montreal (NYSE:
), which reported results this morning.
S&P Capital IQ also has four-star ratings on Bank of Nova
) and Toronto Dominion (NYSE:
), both of which report later this week. The firm has a
three-star rating on Canadian Imperial Bank of Commerce (NYSE:
"We expect total revenues for these five to have increased
8.4% for the year in the aggregate, just above the 8.2% growth
recorded in 2011 and the 7.1% rise in 2010," S&P said in the
note. "These actual and expected results reflect the gradual
cooling down of the Canadian economy. Following 2.8% growth in
the period 2008 to 2011, Canadian real GDP growth is expected to
slow to 2.2% in 2013 and 2.3% in 2014."
Investors looking for exposure to multiple Canadian banks
through one ETF can consider the PowerShares KBW International
Financial Portfolio (NYSE:
), which S&P rates Overweight. The ETF is true to its name in
that it is home to banks from a variety of countries, including
Japan, the U.K., Brazil, Spain, Chile, Germany and India. Canada
is the fund's largest country at 17.64 percent, more than double
Japan's weight of 8.66 percent.
Toronto Dominion, Bank of Nova Scotia and Royal Bank of Canada
are all found among KBWX's top-10 holdings. Bank of Montreal and
Canadian Imperial are featured further down KBWX's roster.
An alternative to KBWX for investors to consider is the Market
Vectors Bank and Brokerage ETF (NYSE:
), which S&P Capital IQ also rates Overweight. That ETF
features Royal Bank of Canada, Toronto Dominion and Bank of Nova
Scotia among its top-10 holdings with the trio combining for
nearly 15 percent of the ETF's weight. Bank of Montreal is also
found in RKH's lineup.
The Market Vectors offering is smaller with 26 stocks compared
to 56 for KBWX, but RKH is slightly less expensive with annual
fees of 0.35 percent compared to 0.4 percent for KBWX. KBWX is up
16.5 percent year-to-date while RKH has surged 22.2 percent.
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