TD - Royal Bank of Canada: Risks Ahead

2024-04-24 09:03:17 ET

Summary

• Royal Bank of Canada reported solid Q1/24 results and the U.S. banks which reported so far were rather beating expectations.
• But aside from the income statement, the picture for banks is slowly getting worse with warning signs for the Fed, the FDIC and Jamie Dimon.
• Especially the real estate market could be problematic once again - this time especially commercial real estate loans.
• And while the Royal Bank of Canada might seem fairly valued according to the P/E ratio, it is not a good investment right now.

In my last articles about banks in the United States as well as Canada, I have always been cautious. This is also the case for the Royal Bank of Canada ( RY ), which I covered at the end of August 2023 and was already very cautious about the stock, which was trading for C$122 at that point in time. In the meantime, an investment would have returned a little over 10% and was in-line with the S&P 500 (which was performing great in the last few quarters).

When looking at the stock price performance in the last twelve months and comparing the major U.S. banks to the major Canadian banks, banks like Wells Fargo ( WFC ), Citigroup ( C ) or Bank of America ( BAC ) clearly outperformed the Canadian banks like the Royal Bank of Canada or the Toronto-Dominion Bank ( TD )....

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