Canadian Western Bank shares are down close to 5% after reporting Q1 fiscal 2023 earnings. Earnings were good but revenue was down. Credit losses were not a problem.
It’s no surprise that net interest revenue would be down. We all know we are getting paid a LOT more on certain deposits and GIC rates are way up. It takes longer for loan interest rates to adjust up.
On top of that I believe loan growth and deposit growth will definitely slow or even go negative at all the banks. Many people and businesses with lines of credit and other debt will be looking to paydown debt rather than borrow. And paying down debt reduces deposits also. (Borrowed money seldom leaves the banking system it just becomes the deposit of some other person or company).
ROE was good at 12% but nowhere close to what the big banks achieve. But then CWB trades under book value (which management should consider to be a fail).
I want to do a detailed update of both RBC and CWB before long. It is getting annoying how long CWB is taking to show improvements. I am starting to think a new CEO is needed. Listening to their Investor Day conference a few months ago, I think their CFO is exceptionally good. They do have a lot of good plans but my patience wears thin.
I noticed from TD Direct that they out with a Nova Scotia bond paying 4.05% and maturing in six years. I was thinking no thanks. But for those with a lot of cash and wanting fixed income and wanting to lock in a decent rate this might be okay. It sold out within two hours and so I guess a lot of investors liked it. If you are going to hold actual bonds (as opposed to a bond ETF) then buying at the offering would be the way to go as you pay no commission. I think you then have to be prepared to hold until maturity. While you can sell it early you will find that TD or your broker will grab quite a large commission via the bid / ask spread. This could also be used instead of a 5 year GIC. I thought the 5 year GIC rates were a bit higher but looking this morning on TD, they are pretty close to this 4.05% rate. P.S. I was forgetting, it’s the one year GICs that are higher – close to 5% then you are only sure of getting that rate for one year.