U.S. regional banks experienced a meltdown last week, the likes of which haven’t been seen since 2008. It all started when Silvergate, a crypto bank, collapsed, followed shortly by Silicon Valley Bank. The contagion eventually spread to more banks, leading to fears of systemic risk.
At this point, small U.S. banks are looking pretty risky. No doubt, somebody who buys the right community bank at the right time will get rich, but you’ll have to wade through a large pile of risky bets before you find such an opportunity. The risk of permanent loss of capital in the space is high.
ADVERTIsem*nT
As an alternative, you might want to consider investing in large Canadian banks. Canada’s biggest banks have never endured a single financial crisis in their entire history — a history stretching back 150 years. When you look at Canada’s banking regulations, you can see why that is the case.
Canada regulates its banks very strictly and doesn’t let many players enter the market. As a result, Canadian banks tend to be safer than U.S. banks.
In this article, I will explore two Canadian bank stocks that are relatively safe compared to their U.S. cousins.
Toronto-Dominion Bank (TSX:TD) is the “safest” Canadian bank going by capitalization. Today, it has a 16.2% common equity tier-one (CET1) ratio. The CET1 ratio is cash plus equity divided by all risk-weighted assets. It means that TD’s high-quality, low-risk assets are high as a percentage of total assets. In other words, the bank is not taking on an inordinate amount of risk.
This is a good thing, because “too much risk” is exactly what’s getting U.S. banks in trouble right now. The reason Silicon Valley Bank collapsed, apart from the bank run, was the fact that it was taking too much risk with its investments. It was a similar situation with the other regional banks.
Despite the fact that TD has very good risk-management practices, it has nevertheless been beaten down with the rest of the banking sector. As a result, it now trades at a mere 8.95 times earnings, 2.9 times sales, and 1.32 times book value. I’ve liked TD at much higher prices than today’s prices, so I consider it a real steal right now.
Royal Bank of Canada
Royal Bank of Canada (TSX:RY) is Canada’s largest bank by market cap. Much like TD Bank, it’s cheap, it’s growing, and it has relatively good risk management. Royal Bank’s CET1 is not quite as high as TD Bank’s. It’s 12.1%, which is not extremely high, though is higher than what you’ll find among the failing U.S. regional banks.
Royal Bank delivered a pretty strong showing in its most recent quarter. In it, the bank delivered a 12.5% increase in revenue and a 7% increase in adjusted earnings. It was a pretty good showing. Despite all the macroeconomic issues banks are facing right now, RY managed to pull off positive growth in revenue and even earnings on an adjusted basis. This bank’s 150-year track record of financial stability speaks for itself. If you’re looking for a bank you won’t lose your shirt on, look to Royal Bank of Canada.
We are giving away a FREE copy of our "5 Small-Cap Canadian Growth Stocks Under $5" report. These are 5 Canadian stocks that we think are screaming buys today.
Fool contributor Andrew Button has positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The only difference is that the Canadian banks have a larger share of loans.This is one of the main factors that makes them safer than American banks, even the larger ones. The Canadian financial system and the American financial system aren't really that different.
Toronto-Dominion Bank (TSX:TD) is the “safest” Canadian bank going by capitalization. Today, it has a 16.2% common equity tier-one (CET1) ratio. The CET1 ratio is cash plus equity divided by all risk-weighted assets. It means that TD's high-quality, low-risk assets are high as a percentage of total assets.
However, experts say that SVB's failure is unlikely to have an effect on Canada's big banks. If a Canadian financial institution did fail, that's where the Canada Deposit Insurance Corporation (CDIC) would step in.
The short answer is no. Banks cannot take your money without your permission, at least not legally. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per account holder, per bank. If the bank fails, you will return your money to the insured limit.
Deposit insurance protects your savings if your financial institution fails. You don't have to apply or pay for deposit insurance. The Canada Deposit Insurance Corporation (CDIC) automatically insures your eligible deposits. This applies to deposits held at CDIC member institutions in Canada.
You're protected. The Canada Deposit Insurance Corporation, or CDIC, guarantees you'll get your money back if a bank fails. It covers up to $100,000 per account.
The World Economic Forum consistently ranks Canadian banks as being among the world's most stable, says Labrèche. “We have a more concentrated, less competitive banking system here in Canada,” says Ing-Haw Cheng, an associate professor of finance with the University of Toronto's Rotman School of Management.
Yes, it's rare, but they have and it could happen. The Canada Deposit Insurance Corporation (CDIC) is a federal Crown corporation that exists to protect eligible deposits to member financial institutions against their failure.
According to the IMF's 2018 annual Article IV Mission to Canada, compared to all the G7 countries, including the United States, Canada's "total government net debt-to-GDP ratio", is the lowest. Canada has been the G7 leader in economic growth since 2016. The unemployment rate in Canada is at its lowest level since c.
How your money is protected. Money deposited into bank accounts will be safe as long as your financial institution is federally insured. The FDIC and National Credit Union Administration (NCUA) oversee banks and credit unions, respectively. These federal agencies also provide deposit insurance.
For the most part, if you keep your money at an institution that's FDIC-insured, your money is safe — at least up to $250,000 in accounts at the failing institution. You're guaranteed that $250,000, and if the bank is acquired, even amounts over the limit may be smoothly transferred to the new bank.
Private Vaults are the most secure way to protect wealth. Moving your liquid assets into hard assets such as gold, sliver, diamonds, or coins helps invest in depression proof investments.
In short, if you have less than $250,000 in your account at an FDIC-insured US bank, then you almost certainly have nothing to worry about. Each deposit account owner will be insured up to $250,000 — so, for example, if you have a joint account with your spouse, your money will be insured up to $500,000.
Where to safely keep cash at home. Just like any other piece of paper, cash can get lost, wet or burned. Consider buying a fireproof and waterproof safe for your home. It's also useful for storing other valuables in your home such as jewelry and important personal documents.
The World Economic Forum consistently ranks Canadian banks as being among the world's most stable, says Labrèche. “We have a more concentrated, less competitive banking system here in Canada,” says Ing-Haw Cheng, an associate professor of finance with the University of Toronto's Rotman School of Management.
The Canadian banking system is so well-regulated that bank failure is unlikely. The assurance of a CDIC-insured bank can free you to find the right account for your financial needs. Keep an eye out for things like better interest rates, lower monthly fees, or credit card offers.
Strong banking system: Canada has a highly regulated and stable banking system that is considered one of the soundest in the world. The country's major banks are well-capitalized and have a strong credit rating, which means that they are better equipped to withstand economic shocks and other challenges.
Introduction: My name is Horacio Brakus JD, I am a lively, splendid, jolly, vivacious, vast, cheerful, agreeable person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
