Cdn. Yield: Corps, Trusts, GICs, Pref. Shares - Canadian banks - Flies in the ointment? - Cdn. Yield: Corps, Trusts, GICs, Pref. Shares - InvestorVillage


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Msg  112478 of 112649  at  11/29/2022 11:22:43 AM  by

agrossfarm


 In response to msg 112476 by  marpincan
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Re: Canadian banks - Flies in the ointment?

The authors of the SA cite mostly macro issues to suggest caution about the Canadian banks.
 
The Audio interview I linked covering the current Canadian Real Estate and mortgage market and where its going (post 112472) covers more of the fundamentals of the large real estate business of Canadian banks.
 
What saved Canadian banks in 2008-2009 is that, since they hold mortgages they write, they was minimal mortgage fraud and lots of insured mortgages. There was therefore few defaults and foreclosures, compared to the US (and Canadian law does not just allow consumers to walk away from loans like they can in the USA), where originators did a lot of MTG fraud, securitized the mortgages they wrote, and sold different trances, especially of sub-prime MTG to suckers looking for high % coupons (insurance companies, income investors etc.). 
 
THIS time, it is the Canadian RE Market that is in a much larger bubble and Canadian mortgages have an historically high rate of mortgage fraud in Alt. A mortgages (mostly for self-employed home/condo/flippable) buyers. Add that rising home prices have increased HELOC balances and now the collateral no longer backs all the debt.
 
About half the MTG rate floaters are seeing their payments/principle reset or amortization stretched to avoid banks having to acknowledge a default and loans that are in the biggest trouble are being shed by the banks and picked up by non-bank and private lenders (so far). 
 
Meanwhile the value of underlying collateral is declining and banks have been allowing loan balances ABOVE 100%.
 
This may not be fatal for any of the Big Govt.-protected, outrageous fee-charging Canadian banks... but their increasingly indebted customers and the decline (instead of ridiculous climbing) home values will restrict their borrowing growth and reduce their business across the board.
 
IMO they will be great buys when they hit bottom.
 
And most people who have held banks because of they are perceived to be Blue Chips, will continue to do so, which is typical. Nevertheless many Blue Chips of 30 or 40 years ago are no longer Blue Chips... Nortel? Mitel? IBM? GE? Simpsons? ATT? Steinberg?
 


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Replies
Msg # Subject Author Recs Date Posted
112479 Re: Canadian banks - Flies in the ointment? The Red 0 11/29/2022 12:03:30 PM
112481 Re: Canadian banks - Flies in the ointment? marpincan 1 11/29/2022 4:44:23 PM




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