Wednesday was a negative day in the markets as the S&P 500 was down 0.7% and Toronto down a full 1.0%.
The Canadian dollar slipped under 74 U.S. cents as the Bank of Canada left interest rates unchanged.
Among the bigger declines were: Shopify – down 3.6%, Couche-Tard down 3.0%, and TFI International down 3.9% (I added to my position today based on the lower price).
Canadian Western Bank released Q2 earnings. Loans were up 10% and Deposits up 8% year over year which is solid growth. Adjusted earnings per share were up only 1% as non-interest expenses were higher. The Provision for credit losses remained quite low at 23 basis points, up for 20 in the prior yer but down slight from 24 in Q1. Impaired loans rose to 0.62% versus 0.49% last year and 0.51% last quarter and with the increase due to one general commercial loan in Saskatchewan.
Overall the result was not great but not bad. The market initially pushed the stock price down about 3% and I added a little to my position. But the price recovered during and after the conference call and was up 1.7% at the close. That was a nicely positive reaction considering the negative day in the markets.
It seems likely that CWB will continue to increase earnings over the long term although it could certainly have some decreases if recession conditions develop. It has not reported a loss in any quarter in over 25 years but that could happen if loan losses become significantly higher. If CWB does continue to grow earnings over the years it will also very likely enjoy periods where the price to book ratio rises considerable above the current 1.0.