'Big Six' banks beat earnings, can it last?

Hinzugefügt: 2026-05-31

[00:00:00]Look at any banks that have outperformed the S&P 500 by roughly 25 percentage points over the past 12 months. And this week, the big six beat earnings expectations. But how do they stack up as an investment opportunity amid the AI boom? Let's unpack that with Mehmet Bedirhan, senior market analyst and a strategist rather with Rosenberg Research. Thanks for being with us today.

[00:00:22]>> Hi, good morning.

[00:00:23]>> Uh let's get it Yeah, let's get into it, shall we? You know, the big six Canadian banks we talked about beating expectations uh this quarter. Take us through, you know, your analysis of this at least initially too and why we're seeing at least right across the board from the banks of the quarter.

[00:00:36]>> Well, I think the the quarterly reports are just reinforcing the quality and capital return appeal of these assets.

[00:00:43]Um we wrote a report about these uh banks uh very recently a few weeks ago and earlier in the year. We are highlighting the quality aspect of these uh stocks uh as a tactical investment opportunity.

[00:00:58]We I'm not sure about that. We we and we don't we try not to comment on that that much. The valuations are high when you look at the historical charts, but there's a reason for it because they offer a very quality premium asset with increasing dividends and they create a very good diversification opportunity in a market where uh everything's driven by the AI craze and the and the euphoria. So, uh when you look at global diversification, uh high profitability, dividend growth, and as you see in the global in in the quarterly reports today with the uh share buyback programs and earnings growth, they they are they are looking like a gold standard. Uh so, we maintain our positive view on these stocks.

[00:01:49]>> So, maintaining it and and for the foreseeable future too, maybe at least for now or or or how long too?

[00:01:54]>> Yes, so I've been answering questions about the these stocks for a while now. Everyone's coming up with arguments about their evaluations.

[00:02:03]Uh yes, when you look at the historical charts, um they look at all-time highs, fine.

[00:02:10]Your cup of coffee is also on all-time highs, uh but you keep buying it every morning.

[00:02:16]Um so, our argument is that you need to look at the context. There are a few good things about these stocks right now that is uh creating a tailwind. One is uh renewed interest in Canada.

[00:02:28]Uh it's part of the hard assets, mining, materials trade globally looking for non-US dollar assets.

[00:02:37]And they're uh benefiting from those flows.

[00:02:40]There's also an appeal from uh the different global asset manager from their global asset manager's viewpoint that they they create a very good diversification against this AI AI euphoria. When you look at the charts of the returns of these stocks uh relative to the S&P 500 and the tech or MAG 7 indices, you see that they outperform when the tech uh universe starts to underperform. So, that's that's a very good uh feature for the portfolios in our view.

[00:03:13]Um and also uh the valuations should be uh compared relative to other peers. Yes, they seem a bit uh pricey relative to the US peers, for example, but for a good reason. When you look at their profitability, they're much higher, too.

[00:03:31]Relative to Europe, yes, they're expensive for a good reason because there are some structural issues going on in the European financials. But when you compare it to the Australian banks, for example, they're not.

[00:03:43]So, Australia is another country which is having some good tailwinds from the hard assets and materials and mining and gold. And all of a sudden, when you compare them to Australians, they're not that expensive. So, there is some global flow related tailwinds behind these stocks, which seem to be delivering pretty good financial results anyway, so why not hold them?

[00:04:09]>> Mhm. If you've had them and if you are holding them then you're in good shape, but what about getting in right now too, right? We talked about the P multiples and you you know, re-rated to historical highs and you talk about a lot of the benefits and where we're going right now, but getting in right now is worth it or or should we be waiting, you know, for them to come down possibly a little bit?

[00:04:27]>> Okay, all right, so yes, there the trade is a bit mature compared to what you see from last year, but we still think that they have a good place in the portfolios. Uh if you're um more focused on low volatility, uh some income and good profitability.

[00:04:47]So, uh that that's the investment thesis here. It's not a tactical uh price uh reaction. Uh they might ease today maybe because of the overall market uh sentiment um and in the short term they may they might slow down, but I think they have a uh worthwhile place in a in a in a global asset mix.

[00:05:10]>> Which one of the big six, you know, is is really attractive to you right now?

[00:05:14]Is there one of them that stands out above the other now that we've seen, you know, Q2 results for for the last couple days?

[00:05:20]>> Um well, well, we we as a house we're not trying to be stock specific. Uh we make macro calls and we identify the opportunities in asset allocation strategy here. So, I'd rather not make a specific call on the stocks.

[00:05:35]>> Okay. Um for you and and and the Bank of Canada in particular before I let you go, we'll switch gears maybe just a little bit to um has been on hold here for the last little bit. We're not sure and and and and you you really I'm sure depending on what's going to happen in the Middle East about where the bank is going to go with the next the next rate call. What are you seeing and and what are your expectations here as we get into the to the next quarter next few months?

[00:05:57]>> Uh are you asking about Bank of Canada policy?

[00:05:59]>> Yeah, Bank of Canada, yep.

[00:06:00]>> Uh we don't see a hike uh possibility as much as the the market prices. I think the the fears about the oil prices are a bit overdone because uh this is a supply shock that the central bank cannot fix.

[00:06:16]Uh on the other hand uh there are some weaknesses in the economy. Uh so I think things are going to balance out. Uh we agree with the viewpoint that there is hold in the foreseeable future uh and it will all depend on how the data is going to come in the summer. How that does that translate into the bank stocks?

[00:06:38]Uh I think it's a mixed uh bag so it's very difficult to draw a conclusion from that. But what we see from the earnings reports is that the banks are benefiting from the capital markets a lot just like the US peers.

[00:06:53]And that's going to be I think a key for the Canadian banks as well. So the investors I think should focus on what's going on with the capital markets returns. The banks are making a lot of money from the wealth management and the other exchange-traded product fees uh just like the US banks. And I think any soaring a mood in the equity markets later on uh will probably weigh on their earnings expectations as well later in the year if that happens. Otherwise, there's some good tailwinds as I said.

[00:07:24]>> Mhm.

[00:07:25]Me and Darren, uh senior market strategist at Rosenberg Research.

[00:07:28]Appreciate your time today, sir. Thanks so much for this.

[00:07:30]>> Thank you. Pleasure.