CANADIAN BANKS
Speculation on Possible Taxation of Tier 1 Eligible Trust Preferreds There is some concern among treasurers of banks and insurers that the new income trust tax policy will result in their “trust preferreds” being taxable. In a worst-case scenario, these companies would lose access to a very Wal-Mart Eyes Banking Rival grocery retailer Loblaw offers bank accounts, lines of credit, and mortgages through its PC Financial division, which is run in partnership with Canadian Imperial Bank of Commerce. Canadian Tire also acquired a banking licence in Potential Impact of Trust Tax on Financials Canadian Imperial Bank of Commerce and Royal Bank of Canada have been the most active banks in the income-trust sector and have very large wealth-management franchises, so could have the highest earnings risk, de Verteuil noted. Bank Earnings, Dividends, & Taxes Although growing slowly, Canadian banks directly and indirectly remain large tax payers (close to an estimated $10 billion worldwide in 2010, excluding capital gains taxes paid by their owners who occasionally sell shares). Banks May Suffer from Trust Market Demise In a separate note, CIBC banking analyst Darko Mihelic said the impact of the income trust changes on Canadian bank mutual fund arms will be slightly more moderate, but he nevertheless concurs "that mutual fund growth is likely to slow Foreign Banks in Canada Foreign banks are playing an important role in Canada’s financial Foreign banks can choose to incorporate themselves as a separate Canadian Both deals gave the big Canadian banks a fairly inexpensive way to enter a niche market. Manulife Q3 2006 Earnings In this case, we continue to believe that Manulife has much superior long term earnings and dividend growth potential than any of the Canadian banks. US Operations Earnings in the US Insurance division include individual insurance and Foreign Bank Restrictions in China Four of the five big Canadian banks -- all except Toronto-Dominion -- are active in China today. But analysts do not expect the country to fulfill its promise to lift all restrictions on foreign banks by Dec. 11. Canadian Banks & Insurance: Canadian online brokers ranking belies The Canadian online brokerage industry lives under the shadow of the Globe and Mail rankings, to a far greater extent than the Banks worried about the old Gomez online banking surveys. I believe those surveys, while useful indicators, Life Insurance Co Valuations Somewhat Stretched Versus Canadian banks, Canadian lifecos are trading at a 4% premium on a forward P/E basis (versus 2% average premium) We would expect the banks, with a significantly higher dividend yield (over 3%, versus the Canadian lifecos at 2.2%)
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