Our article today will provide a Canadian Bank stocks outlook for 2018 based on 3 key factors. Keep an eye out for our top 3 picks in the Canadian banking sector over the course of the next days.
What will happen in this sector now that Bank of Canada increased the rate for the 1st time? Are we about to witness the start of the downfall of Canadian banks? What about the housing bubble in Canada? Are Canadian Banks undervalued for how strong and profitable they are?
To answer these questions, as usual, we will starts with price charts and identify meaningful patterns.
Canadian Bank stocks outlook for 2018: Key factors to consider
On July the 12th, we witnessed an important event in the Canadian market: The Bank of Canada raised Canada’s key interest rate for the first time since 2010 by a quarter of a percentage point. This increase was followed shortly after by a second increase on September the 6th of another quarter of a percentage. That is big news for Canadian and international markets.
Given the importance of this event, we decided to share with our readers our Canadian Bank stocks outlook for 2018. To provide an accurate outlook of the Canadian banks, this article includes:
- An overview of Canada’s Economy
- 3 factors investors need to watch given their strong impact on Canadian banks
- Canadian banks performance during the last 10 years
- Our Investinghaven Canadian banks outlook for 2018
A top 3 Canadian banks picks in 2018 will follow in a separate article.
Canadian Bank stocks outlook 2018: An overview of the Canadian Economy
The key thing to consider is the Canadian economy. In fact, the Canadian economy is in the middle of a strong growth spurt. In fact, it is the strongest the country has seen since 2008. The charts below illustrate this strength:
The start of an environment of rising Interest rates in Canada for 2018
The 2 consecutive interest rate increases from the Bank of Canada in 2018 will give the country’s lenders a much awaited boost in lending margins.
The next chart is very important for the future performance of Canadian banks. It represents the evolution of Canada’s prime rate. As we can see, Canadian banks had to deal with smaller margins but managed to actually post record revenues year after year. This speaks to their ability to reduce costs and generate revenue based on the diversification of their activities. Now that the Bank of Canada increased it’s leading interest rate, banks are following and this should provide an increase of their revenues.Â
