Comparing and contrasting large Canadian and U.S. banks

Global financial stocks have surged over 125% since having bottomed out in March. In the U.S., financials have more than doubled and in Canada have rallied over 90%. We believe that while financial stocks across the globe may still have more upside as the economy levels off and deal flow picks back up, discrimination will be instrumental going forward. Consistent with this, our favourite picks, which we feel offer the best risk/reward profile are the large Canadian banks. Indeed, all of the “big five” Canadian banks (Royal Bank (RY), CIBC (CM), TD Canada Trust (TD), ScotiaBank (BNS), and Bank of Montreal (BMO)) are on our “Strong buy” list, and are well-positioned to beat the market over a 3-12 month time horizon. This compares to the wide variety of ratings for U.S. banks, which range from “Strong buys” for Bank of America (BAC), J.P. Morgan (JPM) and Wells Fargo (WFC), to “Strong sells” for Citigroup (C) and Suntrust (STI).

Note 1: Prices are shown adjusted for stock splits and dividends
Note 2: LS = Left Scale; RS = Right Scale
Sources: Yahoo! Finance for ETF prices and Bank of Canada for exchange rates
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