It’s confirmed. We have the healthiest banks in the world. They’ve all reported their second quarter earnings and the numbers are spectacular. Industry leader RBC had a return on equity of 19%, while CIBC and National Bank were over 20%. Yes, 20% in a 2% inflation world.
These results are important because Canadian investors are highly dependent on their banks. Bank stocks account for 21% of the S&P/TSX Composite Index and play an even larger role in most investment portfolios (especially when preferred shares and bonds are taken into account).
In contrast to other countries, Canadians have made a potful of money on bank stocks. It’s been a great twenty-five year run in which the Big Six saw their profits grow from $2 billion a year to almost $8 billion a quarter. Before I take a peek into the next twenty-five, it’s informative to look at what’s fueled the growth. (more)
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