Canadian Banking: Sober, Boring, and Successful
Ryan Cole, The Investment U Research Team
It wasn’t so long ago Canada’s banking system was considered behind the times. Almost cute, an antiquarian relic, it banked in the old ways… and it was holding Canada back.
After all, while real estate throughout the world was doubling every few years, Canadian homes were moving up relatively modestly.
While risk in the rest of the world had been eliminated through complicated instruments that everyone trusted “someone else” understood, Canada was still using the traditional loan-and-hold mortgage model…
I’m sure you see where this is going.
Canada’s banks weren’t caught up in one of the biggest global bubbles of the last few decades, and they aren’t participating in the fallout either. It’s why investors around the world are looking at Canada, and three of its banks that may be the safest in the world.
One of the few Healthy Economies
Make no mistake – with almost 80% of Canada’s exports going to the United States, the global mess has touched our “neighbor to the north” deeply. But in almost every regard, it’s doing better than the rest of the world.
- GDP actually grew last year – only 0.1%, but still, it grew
- Unemployment is a “mere” 6.1%
- As a major commodity producer, Canada is enjoying the current mini-commodity boom immensely
Indeed, it’s easy to forget, Canada is the world’s eighth-largest exporter of oil, and second only to the Saudis for proven reserves. What’s more, even as Saudi Arabia is sucking the last out of her major oil fields, Canada is only now beginning to tap the vast oil sands of Alberta.
So, as inflation hits the world markets… and inflation fears cause governments like China to convert dollar holdings into commodities like oil, gold, and copper (all of which Canada produces in spades), our northern neighbor looks to be one of the healthier economies going forward.
One of the Few Fully Functioning Financial Systems
Canadian banks bear a large responsibility for the country’s good fortune. Rather than get caught up in the hysteria that gripped almost every major financial institution the last few years, Canada’s banks kept doing business the boring, old-fashioned way.
The way that it’s proven to work.
Now, everyone wants to emulate Canada’s banks.
In October 2008 – while the rest of the world burned – the World Economic Forum deemed Canada’s banking system the safest and soundest in the world. (The U.S. system came in fat 40.)
While the top five U.S. banks lost $8.3 billion in 2008 (and continue to bleed money in 2009, no matter what their funny accounting numbers say), the top five Canadian banks made $8.2 billion (with no financial chicanery required).
In short, Canada and Canadian banks in particular, are in as good a shape as they’ve ever been. And compared to the world as a whole, the country is in the best shape of its life.
Considering how well the banks are doing and how wise it would be to hedge against another downturn in the market – which is likely to hit sometime before September if it comes – you’d be wise to put some of your money into the soundest banks in the world.
The Safest Banks in the World
Our favorites are the Royal Bank of Canada (NYSE: RY), the Bank of Nova Scotia (NYSE: BNS), and Toronto-Dominion Bank (NYSE: TD). All three are up over 30% for the year, all three pay very hefty dividends, and all three have been rated among the safest banks in the world by Global Finance magazine.
They’d be great buys even in the best of times. But with the possibility of worse times still ahead, it only makes sense to pick a few of these up. Canadian banks can help you weather any coming storms and profit from any economic recovery on the horizon.
Good investing,
Ryan Cole
P.S. If you’d like to find out more on uncovering some of the best foreign investments around the world, take a look at the Oxford Club’s New Frontier Trader Service.
Related Investment U Articles:
- The Best Banks In North America Probably Aren’t Where You Think
- The Best Dollar Investment on Earth
- Why I’m Banking on Emerging Financial Growth
- New Global Banking Regulations: Buying Opportunities in Europe
- Canada’s Timber Industry Cuts Out the U.S. In Favor of China
2 Responses to “Canadian Banking: Sober, Boring, and Successful”
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I have a question, I bank at RBC Centua here in the US. Since they are owned by the Royal Bank of Canada, I’m hoping that they follow the same practices of their parent company?
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The sixth biggest canadian Bank is the National Bank (NA.to. It only has a few branches in Florida, mostly to service the Canadian snowbirds and is consequently “insulated” from the problems affecting the US. It’s quarterly dividend is about 4.6%, it also offers a dividend reinvestment plan. US residents buying NA will also enjoy a foreign exchange gain when the canadian dollar rises even more relative to the US one.
The analysts of the five “bigger” banks all rate it very highly. Most probably woth considering.
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