On Friday, the S&P 500 was up 0.5% while Toronto was down 0.5%.
lululemon was up 5.5% to reach a new high at $300. I’m certainly surprised at that given that some of its stores are still closed and given that unemployment levels.
Canadian Western Bank was down 3.4% despite reporting better-than-expected earnings on Friday morning. This came on a day when Canandian bank stocks were generally down somewhat. Laurentian Bank after cutting its dividends. That threw a scare into other bank stocks.
To me, any notion that the Canadian banks will simply never cut dividends seems silly. Yes, they will try to avoid it partly because the market would be so shocked. But banks are fundamentally highly leveraged. In banking a 9% equity ratio is considered high! Bad loans can potentially chew through equity quite quickly. Banking regulatiors should be highly focused on protecting depositors, not on protecting share prices. If bad loans were to get large enough to push equity levels down too far then the banks would have no choice but to raise equity through share sales and/or by reducuing didends. A dividend cut at the alrge banks may indeed remain quite likely. But it is certainly not impossible.
As for CWB, its loan losses were higher than recent levels but remained quite managemable. Like the other banks, CWB’s higher provision for credit losses related primarily to estimated future losses on loans that are not currrently late on their payments. If everything goes as CWB is expecting then its share price certainly looks low. But some aspects of CWB’s projections may prove to be optimistic.