Understand the markets this week: August 30, 2021

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    Big income from the major Canadian banks

    The Big Six Canadian banks (Royal Bank of Canada, TD Bank, Scotiabank, BMO, CIBC, and National Bank) released quarterly earnings reports this week and as expected, they have all released some big numbers on the board. Thanks to high levels of government financial support for individuals and companies, the banks have not yet experienced an economic shock due to COVID.

    To control the risk, banks always set up emergency funds, so-called credit risk provisions or credit risk provisions. Because of their more favorable outlook, the Big Six were able to take some of this money out of the safety net and add it to the revenue pillar. An example on that front: In its most recent report, RBC reclaimed $ 540 million in loan loss provisions, compared to $ 96 million it collected in the second quarter.

    Thanks to fees and robust markets, banks have benefited well from their wealth management businesses. This was a major reason during much of the pandemic. According to Thursday’s reports, we saw a 13% increase in TD’s Canadian retail unit and a 25% increase in CIBC.

    The banks have hit particularly hard in terms of revenue and revenue.

    They recovered from the pandemic, and more. Thanks to Mike Heroux of Dividend Stocks Rock for compiling the tables below that compare bank performance in key areas from Q3 2019 – before the pandemic – to the last Q3 of 2021. The numbers in these tables are in the millions. Common Equity Tier 1 (CET1) is a measure of financial strength and the ability to absorb losses; a higher number means more assets are being held for that purpose.

    Source: Dividend Stocks Rock

    We’re seeing impressive growth from the pandemic. National Bank and Royal continue to separate from the crowd in many ways, and it’s common for bank analysts to pick these two as the top picks. The National Bank continues to be Heroux’s top pick as it grows through acquisitions. Heroux also suggests that investors contact TD because of the valuation and the more favorable CET1 ratio.

    From most of the reports or estimates I’ve read, there is a good guess that we will see dividend hikes again in the first or second quarter of 2022. And given the release of loan loss provisions and better overall financial health, banks are expected to make up for lost time with dividend increases of over 10% for many quarters.

    That would be a reward worth waiting for.

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