Canadian banks put together a very nice third quarter earnings season. The top financial institutions were powered by higher loan and deposit volumes and rising interest rates allowed banks to post improved margins for yet another quarter.
Mortgage growth slowed at some of the top banks but this was projected in the first and second quarter.
The BMO Equal Weight Banks ETF (TSX:ZEB) offers investors the chance to diversify their Canadian banks holdings into one equity. Shares of the ETF are up 3.3% in 2018 as of close on September 13 and the stock is up 14.8% year over year.
Banks have also experienced headwinds due to ongoing trade negotiations between the United States and Canada. There is a strong possibility that both sides could walk away without a revised North American Free Trade Agreement (NAFTA) before the October 1 deadline that the United States has set.
Some of the sticking points include access to Canada’s dairy market and the fate of NAFTA Chapter 19.
If negotiations achieve a breakthrough Canadian banks would likely be huge beneficiaries. A strong earnings season would only serve to boost confidence heading into the fall. Is it risky to bet on a deal right now?
In truth it is difficult to say, but both sides have a vested interest in holding up a deal as the November midterms loom in the U.S. and a federal election in Canada is coming in the fall of 2019.
In any case, this ETF has posted double-digit returns over a five-year period. For those looking for exposure to Canadian banks this should be a top target.
