Is the golden era over for Canadian bank stocks?

Good morning! In this week’s newsletter, Stephanie Hughes reports on Scott Thomson’s first big appearance since being named the next CEO of Scotiabank, bank stocks lose their halo and management moves to take Canaccord Genuity private.

— Joe Hood, Managing Editor, Financial Post

Scotia’s incoming CEO sees room to improve international operations

Soctiabank’s decision to tap then-Finning CEO Scott Thomson as its next chief executive took Bay Street by surprise in September, but speculation quickly turned to what the new leader might have planned for the bank’s international strategy. Scotia has lagged its peers in recent years, in part because it has focused on Latin America instead of the safer U.S. market. On Monday, Thomson provided at least a partial answer in his first major public appearance on behalf of the bank (he officially takes the helm later this month). As Stephanie Hughes reported, Thomson told a banking conference he thought the bank was not adequately being compensated for the risk it was taking internationally, but that he saw opportunities to make those operations more efficient. He also held up Scotia’s Mexican franchise as a model of what the bank is doing right. Altogether, then, that sounds like changes are coming, but not a total rethink.

RISK AND REWARD

Banks stocks slow their roll

Bank stocks have been one of the sure things for Canadian investors over the past few decades, with a reputation for outperformance and safety. But the past five years, their record hasn’t been as impeccable as you might think. According to data from Canaccord Genuity analyst Scott Chan, over that period the Big Six have on average underperformed the S&P/TSX Composite Index (excluding dividends) four times, with 2021 being the only winning year. While that doesn’t make the banks bad investments — they still spit off healthy dividends, blunting the impact of any price underperformance — it does put their exalted status up for debate. And with many expecting at least a mild recession as a result of the Bank of Canada’s tightening cycle, 2023 may not offer any relief.

END OF AN ERA

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Management makes its move at Canaccord Genuity

Canaccord Genuity Group Inc.’s stock went on a huge run after the onset of the pandemic as dealmaking boomed and markets soared. But since the start of 2022, it had suffered a precipitous decline. Earlier this week, a management group decided the plunge had gone too far, and launched a $1.127 billion bid — 30 per cent above the previous closing price — to take the company private. As Denise Paglinawan reported, the management group, which currently collectively owns around 21.3 per cent of shares, includes the investment banking and financial services company’s president and chief executive, chairman, global operating committee and additional senior and tenured employees. That shares closed Wednesday at the takeover price of $11.25 suggests the market thinks the deal will go through.

$1.13 BILLION BID

CIBC to pay out $153 million in proposed class-action settlement over unpaid overtime 

CIBC to appeal $1.1-billion damage award in Cerberus lawsuit 

Rabobank to expand Canadian agricultural lending business to farmers and ranchers 

Canadian pension giants join forces to capitalize on private credit boom 

Banking watchdog weighs new mortgage rules as Canada’s housing risks rise 

Goldman Sachs to cut about 3,200 jobs this week after cost review 

The FP Finance Newsletter was compiled by FP Managing Editor Joe Hood. Reporters Barbara Shecter and Stephanie Hughes go where the action is. Designer Gigi Suhanic made it look great and web editors Pamela Heaven, Victoria Wells and Noella Ovid contributed at every step along the way.

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