Common sense tells me banks will be negatively affected by both shrinking margins and lower revenues in upcoming years. I run rough estimations (normalized margin of 15% with 15% discount rate to give space to upcoming recession risk) on several U.S. banks that showed they still have ~30% to go down to be considered “undervalued” except few (C, ALLY).
I think Can banks will be ok, but the only bank I have a position in is TD, Im a little unsettled since TD supposedly caught up in a billion$+ Ponzi scheme in Feb and they have a Tennessee bank purchase at a much higher price in process, hope they can let it fall through or get a better price.
The inversion of interest rates is a tough one for banks, their model is borrow short(deposits) and lend long(mortgages etc). Personally when I realized my broker in Canada paid me zero on cash I started using a MM fund in Jan, a few hundred $ a month is worth the hassle. Also I had a significant amount at a Canadian virtual bank paying me 0.4% on my "High interest savings acct", I was shocked as they have always been actually paying "high interest" relative to others in the past. I moved most to another Canadian virtual bank which is paying 2.5% on my checking account and approx +0.6% more on each GIC's. Took me a while, but starting in Sept 22 I started putting money into 1 year GIC's every month. Hadnt bought a GIC in over 20 years prior to Sept. I think its just many other people doing more or less what Im doing..
Common sense tells me banks will be negatively affected by both shrinking margins and lower revenues in upcoming years. I run rough estimations (normalized margin of 15% with 15% discount rate to give space to upcoming recession risk) on several U.S. banks that showed they still have ~30% to go down to be considered “undervalued” except few (C, ALLY).
I spoke with a seasoned Bay St Bank analyst who has seen US hedge funds short Canadian banks 12 times . Their record is 0 for 12 .
I think Can banks will be ok, but the only bank I have a position in is TD, Im a little unsettled since TD supposedly caught up in a billion$+ Ponzi scheme in Feb and they have a Tennessee bank purchase at a much higher price in process, hope they can let it fall through or get a better price.
The inversion of interest rates is a tough one for banks, their model is borrow short(deposits) and lend long(mortgages etc). Personally when I realized my broker in Canada paid me zero on cash I started using a MM fund in Jan, a few hundred $ a month is worth the hassle. Also I had a significant amount at a Canadian virtual bank paying me 0.4% on my "High interest savings acct", I was shocked as they have always been actually paying "high interest" relative to others in the past. I moved most to another Canadian virtual bank which is paying 2.5% on my checking account and approx +0.6% more on each GIC's. Took me a while, but starting in Sept 22 I started putting money into 1 year GIC's every month. Hadnt bought a GIC in over 20 years prior to Sept. I think its just many other people doing more or less what Im doing..