Weekend Reading – Big bank earnings edition

Weekend Reading – Big bank earnings edition

Hi Everyone,

Welcome to a new Weekend Reading edition, highlighting big bank earnings.

In case you missed a few recent posts:

I shared how one investor has amassed a whopping $800,000+ inside his TFSA:

Weekend Reading – $800,000 or more in your TFSA

I revisited and tested my own assumptions related to bonds:

Then and Now – Revisiting the need for bonds

I posted a few updates/Q&As from readers here:

Reader Questions – Saving and Investing Updates

Weekend Reading – Big bank earnings edition

via GIPHY

Back to the subject at hand, no real surprises…right?

Leveraging various sources, including The Globe and Mail (sub), I thought I would highlight some recent big Canadian bank earnings and how that might apply, change, or alter our investing approach. 

Here goes…

  • The biggest of the bunch by market cap – Royal Bank of Canada (RY) surpassed analysts’ expectations for its fiscal second quarter, driven by robust gains in its capital-markets division and lower-than-anticipated provisions for potential loan losses. RBC’s net income rose by 7.3% to $3.95 billion from $3.68 billion last year. They declared a 4% increase in its quarterly common share dividend, bringing it to $1.42 per share. This dividend is payable on and after August 23, 2024, to shareholders of record at the close of business on July 25, 2024.
  • Unlike RY, shares of Bank of Montreal (BMO) plunged earlier this week by 9.5% at one point in response to its second-quarter fiscal 2024 (ended Apr 30) results. Adjusted earnings per share of C$2.59 declined 10.4% year over year. BMO earned $1.87-billion, or $2.36 per share, in the three months that ended April 30, compared with $1.03-billion, or $1.26 per share, in the same quarter last year. BMO decided to raise its quarterly dividend by 4 cents from the prior quarter to $1.55 per share.
  • Boy, TD. Get your act together…. although TD Bank (TD) reported its second-quarter profit beat analysts’ estimates, it earned $2.56-billion, or $1.35 per share, in the three months that ended April 30, compared with $3.31-billion, or $1.69 per share, in the same quarter last year. That said, TD might incur some heafty fines related to its anti-money-laundering practices. The company was in no position to raise the dividend.
  • Bank of Nova Scotia (BNS) is improving. BNS earned $2.09-billion, or $1.57 per share, in the three months that ended April 30, compared with $2.15-billion, or $1.68 per share, in the same quarter last year. BNS kept its quarterly dividend unchanged at $1.06 per share.
  • National Bank of Canada (NA) continues an upward climb. National Bank earned $906-million, or $2.54 per share, in the three months that ended April 30, compared with $832-million, or $2.34 per share, in the same quarter last year. NA kindly rewarded shareholders with a dividend raise by 4 cents to $1.10 per share.
  • CIBC (CM) had a stable quarter: earnings per share were up 2 per cent year-over-year. After adjusting for one-time items, the bank made $1.75 per share, beating analyst estimates of $1.65 per share. They maintained their dividend.
  • Finally, growth story EQ Bank (EQB) also continues to shine. Recently, with year-over-year growth in personal and commerical banking, EQB’s Board of Directors declared a dividend of $0.45 per common share payable on June 28, 2024, to shareholders of record as of June 14, 2024, representing a +7% increase from the dividend paid in March 2024 and 22% above the payment made in June 2023. Tidy. 

How do I/we take advantage of big bank earnings?

Ha. Do nothing. 

Seriously. 

Our hybrid investing plan has us staying the investing course in all these banks for these reasons:

  1. Dividend income today and growing dividend income over time, coupled with
  2. Price appreciation with low-cost ETFs over time too.

Stock market down, portfolio up

“The true investor…will do better if he forgets about the stock market and pays attention to his dividend returns and to the operation results of his companies.” – I hear ya: Benjamin Graham; “The Intelligent Investor”

In other Weekend Reading…

Dale Roberts also touched on some big bank earnings as some arrived here. 

Early retiree/semi-retiree Nelson Smith shared two (2) key stocks he bought within his TFSA. 

Rob McLister highlighted the increased chance of our Bank of Canada cutting interest rates next month. We’ll see! If I was a betting guy…I would say a 25 bps cut won’t happen…until July.

What do you think? Any bets?

How much is Nvidia now worth? OMG, a lot. 

Nvidia is Worth More Than All of These Companies Combined

A disturbing trend when it comes to our GDP.

Things need to shift in this country, otherwise, we’ll have generational debt amplified by aging demographics. With thanks to @BenRabidoux.

GDP Ben

I liked what John mentioned below – a great reminder nobody (no advisor, no wealth manager, no firm of financial nerds, no DIY investor – nobody) can predict the financial future with any accuracy.

With thanks to @STANDUP_Today

Rate of Returns - John De Goey May 2024

I also liked this post, what Michael Kitces wrote about in terms of financial advisor fees:

Financial Advisor Fees Comparison – All-In Costs For The Typical Financial Advisor?

Many financial advisors operate under a wealth management model, money managers want to manage your money. That’s fine, but just be very careful what you pay for. Like most things in life, you want value for your money.

Most firms including those advisors focusing on sales and marketing (that want to manage your money) start around 1% fees for assets under management (AUM) and they want $500,000 of your money to start working with you. While there is a sliding, downward fee-based scale offerred by some money managers for the very wealthy, ensure you do the math: in this example at least $5,000 paid every year on your first $500,000 or so to be managed. 

If that’s valuable to you, great, but only you can decide if a money manager and those fees are right for you.

Oh, and that’s just paying them.

From Michael:

“The caveat to this analysis, though, is that it doesn’t actually include the underlying expense ratios of the investment vehicles being purchased by financial advisors on behalf of their clients.”

Many money managers are increasingly putting clients into indexed funds – many of the same indexed funds you can buy and hold on your own. So, add another 0.30% for investment products those advisors used on your behalf on top of your 1% starting fee for a total fee paid in the range of 1.3% for someone else to manage your money. 

Fees matter. I stopped paying for someone else’s yacht a long time ago. With thanks to @DividendSalary.

Financial Advisor Fees - BLK

Thanks as always for your readership and have a great weekend.

Mark

Save, Invest, Prosper!

As always, check my Deals page – partnerships and discounts to help you make the most out of your money.

Check out my partnerships with:

  • Dividend Stocks Rock (including my deep lifetime discount from Mike!)
  • 5i Research
  • StockTrades.ca
  • LegalWills
  • Borrowell 
  • and more!

As always, you can also consider reaching out here for some low-cost financial projections services – anytime.

Cashflows & Portfolios

I launched this service with my DIY investor good friend – a service founded by DIY investors for DIY investors without the conflict of any advice, without costly fees (like some folks charge), while offering money-back guarantees because we’d expect that as DIY folks ourselves…

In fact, there are now two (2) low-cost services to choose from:

  • Done-For-You – we do the work and data entry, and provide your reports OR 
  • DIY – whereby you do all the work, you do your own data entries, and you get your own results in the software – we essentially open up some professional financial software for you to use to be your own retirement income planner!

Every returning member using our Done-For-You model gets a HUGE discount, automatically. Every returning DIY member also gets a nice discount, no questions asked. We offer a money-back guarantee for both services. Try finding all of that anywhere else…!

As a My Own Advisor reader, you always get a discount off either service. Just mention my site. That’s it.  

Mark

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

13 Responses to "Weekend Reading – Big bank earnings edition"

  1. RONALD S. TUTHILL · Edit

    Hi Mark: Your second last article needs some clarification. Yes selling 31000 shares for $25 Mil. looks bad by the chairman and CEO but if those shares were in the form of stock options given to him over the years than it is just his way of recouping some funds. Company employees do this all the time. If they were shares that he personally bought and he is now dumping than it truly is a bad sign. Yes TD only raises its dividend once a year and has and as for the laundering issue it just puts TD in a bad light and the shares fall but TD isn’t going bankrupt so this is actually a buying opportunity. As far as bonds usually I would say that I wouldn’t touch them with a 10 foot pole but I have slightly changed my stance. Very slightly. My main point occurred many years ago which really soured me on bonds. This happened in ’73- ’74 and after the Arab Oil Crises and stocks went dormant so I bought bonds. Companies like Polysar Corp., Falconbridge Corp. and Spruce Falls Pulp and Paper all of which paid around 9%- 9.1% but I soon found that this interest rate is fully taxable and no tax break. Not good. Also by ’79- ’80 these bonds bought at around $94.00 to $99.00 had dropped to $62.625. Not one to take a loss I held on until they matured which was not until ’88- ’92. From the mid seventies to low nineties at the time seemed like a long time and with no tax break so no bonds for me. Lately I’ve been thinking that the only place to put bonds would be in a registered account were the interest wouldn’t be taxable. Outside a registered account no bonds for me. The bonds after they had dropped and looking back on it would have been a good chance to double up but I was already soured on bonds.

    Reply
    1. Ha, yes, more of a joke with Larry selling a bit of BLK stock but all good. CEOs can and should sell shares from time to time just like individual investors should too.

      Although I/we keep some cash, no bonds for me still in our personal portfolio!
      Mark

      Reply
  2. I got a big hike in Divs from CIBC by buying them @ <$50 a few months back. That pays me some place over 7%
    Hard to beat that

    RICARDO

    Reply
  3. Hi Mark, TD raised dividends in January for the last few years, so the question is will they do the increase in January 2025. Hopefully the laundering thing will blow over quickly and not cost to much. Both CIBC and Royal were fined not to long ago for not complying with money laundering and terrorist financing rules, but nothing much came of that, already in the rear view mirror.

    Reply
  4. there is no dividend increase this quarter. It’s part of what we’re thinking is we do want to grow dividends in line with our earnings growth, which we know is going to happen in 2025, rate situation and other stuff to contribute it. So we decided that it’s better to take a pause at this time and we should start commencing our dividend increases in 2025 in line with what we do every year in the second quarter.”
    – Rajagopal Viswanathan, The Bank of Nova Scotia – Group Head & CFO

    Reply
  5. TD has been raising their dividend once a year since 2014 I believe … they already did for 2024. BNS hasn’t raised it for 5 quarters – last year they announced in May. They will reassess dividend increases next year apparently. It’s probably prudent and as my largest holding that’s mixed with disappointment. However you are getting 6.5% and the dividend income tax credit so one can always purchase more with any spare cash.

    Reply
    1. Very prudent. TD is 5% of our portfolio and BNS is 3%. All good. Lots of ways to create shareholder value.
      I appreciate your comments.
      Mark

      Reply
  6. Hey Mark,

    Great summary of the bank earnings. I was admittedly disappointed in the lack of a divvy raise from BNS and CM. Lesson to me – don’t count your chickens before they hatch! LOL. We wrapped May with a go forward dividend income of $57,750. $60k by the end of the year is a no-brainer – what should be my BHAG this hear? heh heh.

    I’m curious on your opinion as to what catalyst the banks who missed their “regular” divvy raise might need to raise in the future? Should I just assume another 6 – 12 months will pass, or do you think an interest rate cut, or other event might lead to an “out of schedule” raise within 12 months?

    Retirement clock 3.58 years………

    Reply
    1. Ha, yes, dividends are never guaranteed but can be assumed – to a point. 🙂

      I will report our next dividend income update in a few weeks.
      For now, this is our status/trend for the year from key accounts, not all of them:

      https://www.myownadvisor.ca/april-2024-dividend-income-update/

      I’m of the mindset for some of these banks, they should likely freeze their dividend(s) and shore up the books.
      My hunch is interest rates will be cut in July (may not be June/next week?) and after the dust settles on lowering interest rates then focus on raises or buybacks or other ways to increase shareholder value in 2025. BNS has already signaled that a bit I think. I love dividends but not at the expense of paying them for the sake of paying them…i.e., there are many ways to increase shareholder value and those Boards should always, thoroughly, review their options.

      Nice stuff on the retirement clock. I don’t have one but I will update some news next month. 🙂
      Mark

      Reply

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