Canadian banks are undervalued, Beutel's Mark Thomson says

The financial sector dominates S&P/TSX earnings.

Sonita Horvitch 3 August, 2016 | 5:00PM

Mark Thomson, managing director of equities and chair of the board at Beutel, Goodman & Co. Ltd., says that the stocks of the major Canadian chartered banks are not getting sufficient applause, given the banks' dominant contribution to the total earnings of the S&P/TSX Composite Index.

He attributes this, in part, to the "negative narrative formulated by non-domestic short-sellers of Canadian bank stocks." This, he says, is "inhibiting the valuation on Canadian bank stocks."

Thomson points out that there is a big gap between the Canadian banks' collective weighting in the Composite Index of 22.3% versus their 51.1% contribution to the index's total earnings. The financial-services sector, as a whole, has a weight of 35.6% in the benchmark and accounts for 61.6% of its earnings.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Brookfield Asset Management Inc Class A44.66 CAD1.22
Canadian National Railway Co121.88 CAD0.90
Canadian Pacific Railway Ltd351.08 CAD0.99
Loblaw Companies Ltd67.43 CAD0.85
Magna International Inc Class A62.33 CAD3.01
Metro Inc56.64 CAD0.34
Nutrien Ltd43.16 CAD1.55
Royal Bank of Canada93.08 CAD1.98
The Toronto-Dominion Bank59.92 CAD2.01

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Sonita Horvitch

Sonita Horvitch  

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