Checking in on U.S. Bank Stocks

Apr 03, 2020 | Frank Sakellariou


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Given that the U.S. Banking sector tends to have a presence in most investment portfolios, we thought it would be important to update you on the impacts of COVID-19 and how the sector has grown much more resilient to navigate periods of economic uncertainty.
 
RBC Wealth Management hosted a call recently with Gerard Cassidy, Head of U.S. Bank Equity Strategy and Large Cap Bank Analyst at RBC Capital Markets.
 
Gerard reminds us that the financial crisis of 2008 actually started with the banking system, this is not the case today, in fact the banks are now part of the solution.
 
“There is a very significant difference between today and 2008/2009 between what’s going on with the banks…this crisis is a healthcare crisis”
 
Following the Global Financial Crisis, regulation became much more stringent for the banks. Banks are now required to go through a Stress Test every year. A Bank Stress Test is an exercise that allows regulators to understand a bank's financial strength – it helps ensure that banks are resilient enough to navigate through periods of economic stress.
 
All the big U.S. banks have passed these tests.
 
The capital of the U.S. banks is 50% higher today than during 2007. Also, liquidity as measured by cash instruments, makes up 25% of the banks’ balance sheets today vs. 10% in 2007.
 
For the past number of years the banks have done things that have put them in a much better position to deal with unexpected economic dislocations.
 
To learn more, please click on the following link to listen to Gerard Cassidy’s 20 minute interview: Checking in on U.S. bank stocks.
 
Disclaimer
This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that action is taken on the latest available information. The strategies and advice in this report are provided for general guidance. Readers should consult their own Investment Advisor when planning to implement a strategy. Interest rates, market conditions, special offers, tax rulings, and other investment factors are subject to change. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / TM Trademark(s) of Royal Bank of Canada. Used under licence. © 2020 RBC Dominion Securities Inc. All rights reserved.

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