RBC was top bank in past decade: analyst

Fri Jan 11, 2008 2:19pm EST
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TORONTO (Reuters) - Investors looking for future Canadian bank-stock outperformers should consider the winners of the past decade, which include Royal Bank of Canada and Bank of Nova Scotia, an analyst says.

Ten years ago this month, the first of two big Canadian bank-merger proposals was unveiled.

The two planned unions -- Royal Bank with Bank of Montreal, and Canadian Imperial Bank of Commerce with Toronto-Dominion Bank -- gave rise to much political debate and were ultimately killed in late 1998 by the Liberal government of the day.

Since then, half of the Big Six Canadian banks have been able to "get on with life" without mergers by using different strategies, while the other half delivered relatively poor performance, Credit Suisse bank analyst Jim Bantis said in a research report this week.

The three in the latter category -- National Bank of Canada, Bank of Montreal and Canadian Imperial Bank of Commerce -- don't appear poised to break out of the pack, Bantis said.

"Despite more compelling valuations, near term we are unconvinced that the lower tier performers of the past decade are positioned to outperform due to respective off-balance sheet issues and lagging domestic retail franchises," Bantis wrote.

Royal, the country's largest bank, took first place in his scorecard of decade-long performance.

The ranking was based on 10 measures, including growth in share price, dividends and return on equity, and levels of non-recurring charges, acquisition spending and branch expansion.

Toronto-Dominion and Scotiabank tied for second place, followed by National Bank, BMO and finally CIBC.   Continued...