Concerns about US banks. Are Canadian banks safer?

[Katharine]

Hi – Between low interest rates, loan defaults, mortgage forebearance, easing of regulations intended to keep banks strong, and intimations from Jamie Dimon and others that dividends may be less of a focus in the future, I am hesitant to invest in US banks. Canadian banks look somewhat more interesting, but it may be because I don’t know enough about them to have the same concerns. What opinions do others have? And have you seen any good articles that discuss this?

And maybe there is some significant difference between large US banks and the hundreds of regional US banks….not sure if they are subject to all the same rules.

Thanks,
Katharine

[Viktor]

In Singapore the regulator advised banks to reduce dividends in order to reduce their risks. That market is very well regulated with very good governance in place to keep greed in place, I think they will emerge stronger in a post-corona world. I am invested in that market and add small amounts regularly

[Charles Sydney]

Hi Katharine – Sure hope Canadian banks are safer – I’ve just invested a chunk of my savings in them (RY and BNS) for retirement income… 🙂

Charles

[Terrence Foley]

Recent news out of Canada is that they suffered the worst quarter GDP in history in Q2 2020.
Canadian banks are as well regulated as in the US, and RY, BNS and TD Canadian banks are large enough to survive the pandemic. They will likely face more loan defaults in the next 3-9 months, the same as the US banks. So waiting might be more prudent.
I have initiated small positions in all three, and will add as the situation becomes more clear. The Canadian government has provided national financial assistance, but I am not sure how it compares with the levels of fiscal stimulus (or recent lack thereof) in the US or abroad.
Anyone with this knowledge would be appreciated.

[oldprof]

@Katherine

These are all good points. I expect banks to be much more attractive post-recession. There will be less pressure because of loan failure concerns and also a better yield curve.

Jeff

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