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Bulls Rush Into ‘Big Six’ Banks With $39 Billion Surge in Canada


By Divya Balji and Doug Alexander

(Bloomberg) Canada’s biggest banks are finally pulling their weight.

Shares of the nation’s largest lenders, known as the “Big Six,” are staging a comeback amid the central bank’s resistance to cutting interest rates. Over the last three months, the stocks have climbed 12% — almost doubling the rally in the country’s benchmark equity index — for an increase of C$52 billion ($39 billion) in value.

Canadian banks have rallied in November even after some disappointing economic reports. While the nation is nowhere near peak growth, data so far this year have been strong enough to keep policy makers from lowering borrowing costs. A report on Friday showed retail sales beat economist estimates, reinforcing the Bank of Canada’s view that the consumer remains resilient despite global trade tensions.

Lenders leading rally in Canadian shares in past three months

The strong economic data and the absence of rate cuts are “all very positive news for the Canadian banking sector, and over the past few months, have translated into solid market gains,” Meny Grauman, an analyst at Cormark Securities, said in a note to clients.

Another potential driver for the shares is the banks’ upcoming fiscal fourth-quarter results. They’re expected to post an average 4% increase in adjusted earnings-per-share, according to the median of estimates compiled by Bloomberg. That’s down from the average of 5.2% growth reported in the previous quarter.

Read more on our quarterly Canadian bank earnings preview here

Big Six Reporting date
Bank of Nova Scotia Nov. 26
Bank of Montreal Dec. 3
National Bank of Canada and Royal Bank of Canada Dec. 4
Canadian Imperial Bank of Commerce and Toronto-Dominion Bank Dec. 5

“The banks, because of the positioning that they have in Canada, are kind of protected species,” said John Kinsey, a money manager at Caldwell Securities in Toronto. “They seem to do rather well no matter what.”

Here’s our weekly wrap of what happened in Canada.

Just The Numbers

Stocks
  • The S&P/TSX snapped four weeks of gains and declined 0.4% as investors awaited news on the U.S.-China trade deal.
  • The pot-stock rebound didn’t last long after surging for most of last week as some analysts called the bottom. Still, the ETFMG Alternative Harvest ETF eked out a gain last week, its biggest in more than a month.
Bonds
  • The Canadian two-year yield rose to 1.58% Friday, while the 10-year yield edged up to 1.47%. Both stayed below their U.S. counterparts. Click here for our weekly bond wrap.
  • On a separate note, a think tank is number crunching assets that may potentially be written down by Canadian energy companies in order to limit C02 emissions. Read more here.
Loonie
  • The loonie weakened as trade risks outweighed comments from Bank of Canada Governor Stephen Poloz that monetary conditions are “about right.”

Chart of The Week

Pot stocks posted their biggest weekly gain in about a month

Politics

Prime Minister Justin Trudeau unveiled his new cabinet as he started a second term in power after losing parliamentary majority. In total, Trudeau named 36 cabinet ministers, half of them women. For the complete list of his cabinet, read this.

A strike at Canadian National Railway Co. put pressure on Trudeau to take action amid curtailing shipments from one the world’s biggest exporters of raw materials.

Economy

Poloz, speaking during an onstage interview in Toronto, said the economy is doing well overall, driven by housing and services, while inflation is on target. He said Canadian monetary policy right now remains stimulative, tempering market expectations for a reduction in borrowing costs at the central bank’s Dec. 4 rate decision.

All eyes will now be on third-quarter gross domestic product data due Nov. 29. A day earlier, current-account figures will be released.

#TrendingInCanada

Toronto Maple Leafs won 3-1 against the Arizona Coyotes under new leadership as Sheldon Keefe won his first game coaching in the NHL.



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