The Canadian Investor - Canadian Banks End 2025 on a High Note

Episode Date: December 11, 2025

In this episode of the Canadian Investor Podcast, EQ Bank announced a major acquisition on the same day as earnings — buying PC Financial and locking in an exclusive partnership with PC Optimum. We break down what the deal really means, why Loblaw becoming a major shareholder matters, and how this positions EQ Bank against Canada’s much larger incumbents. We also dig into earnings from TD and Royal Bank, where strong capital markets are masking softer lending conditions — and why 2026 could look very different for Canadian banks. Are we nearing a reset year? Finally, we cover BRP’s latest results and what looks like a classic cyclical recovery: improving margins, inventory normalization, rising market share, and upgraded guidance — even as the broader consumer picture remains uneven. Tickers of stocks discussed: EQB.TO, TD.TO, RY.TO, DOO.TO  Our New Youtube Channel! Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Do you keep hearing about these all-in-one ETFs lately? Well, I have some exciting news. BMO ETFs just cut the fees on their flagship all-in-one ETFs to 0.15%, making them one of the lowest cost options in Canada. That's right, more value, same smart diversification, all in a single ETF. Whether you're just starting out or simplifying your portfolio, BMO all-in-one ETFs make it easy to invest with confidence. Just ZED it and forget it.

Considering ETFs like ZEQT, BMO's All Equity ETF, or ZGRO, BMO's growth ETF. Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business. Just my reminder to people who own sicklyly, Don't be surprised when there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors.

This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome back to the Canadian investor podcast. My name is Simone Benjjj. I'm back with Dan Kent. We are back for news and earnings. And I think it's going to be a fun one. We'll start off here with some macro news. just came out this morning. The Bank of Canada will be keeping its interest rates unchanged at 2.25%. So the overnight rates. Of course, this is only the short-term rates when you're looking at the longer-term rates. Those are the Bank of Canada bonds that are affected by a whole slew of different macroeconomic factors and none of them probably more important than what the U.S. 10-year yield actually does so that will have a big impact on the Canada five years.

but essentially they're just saying that overall the economy is not doing all that well and they expect Q4 to be pretty flat in terms of the Canadian economy in terms of the demand within the domestic demand but that the economy should grow overall a little bit and of course they're saying that the US are seeing different kinds of pressures of course with a lot of AI demand amongst other things but also so some inflationary pressures because of the tariffs in place. So their outlook is kind of mixed. They're saying that Europe is actually stronger than they had anticipated, especially on the services side, but that they feel that the interest rate is just about right at the current level, but they are prepared to act, of course, as they always say in the event that it would require their intervention.

So, of course, they always leave themselves the door open, but we'll have to see. I know most economists are saying that there's a good chance rates should could hold steady for for some time now. Yeah, I think the five year ended up spiking, didn't it? Like it was probably a week ago, a week ago or so. Like I think it was at like 2.6 and now it's over 3%. So I mean, for those who are kind of holding out for, you know, a cheaper mortgage renewal

potentially, I like I don't think mortgage rates are going to move very much, obviously variable will. But I've kind of noticed because I'm renewing myself the premium. The premium or sorry, the discount for variable rate is declining. Okay. It's not as attractive as it once was. But yeah, it's, I mean, I don't think anybody expected them to drop rates because I think they did that job support.

It was actually pretty good. I mean, I know for the most part, it was part-time jobs again. But I think the unemployment rate fell from 7.1 to like 6.5% or something. Yeah. And I think that might have been the reason why the five year jumped is that they, I guess the bond market was not expected. the numbers to be so good and potentially seeing some inflation pressures, though that could be it there. Yeah, and it was around that time that it did spike too. Yeah, yeah, exactly.

And obviously for people shopping for a mortgage, when you're looking at variable, always keep in mind, yeah, like Dan just mentioned that discount, but when you're taking variable, no matter how good of a deal it may seem compared to fix, and I'm not saying it's a good deal or not right now, but just to keep that in mind is that you are taking on the risk. You are taking on, Well, additional risk because, let's be honest, a fixed mortgage, depending it's three, four, five years. It's basically a variable that renews less, that varies less often. Yeah, pretty much. I mean, I remember, yeah, I've always typically went variable before.

Now I've going fixed just because rates have been so wild. But yeah, it's, you usually get a big discount, but I find they're shrinking. Okay, well, let's move on here to the EQ bank acquisition of PC Financial. So, of course, EQBank is one of our great sponsors, but, and typically we'll look more at the earnings from the big banks because obviously they're pretty popular from our listeners here, but we couldn't not talk about this on the same day, it released its earning EQ Bank announced that it was acquiring PC Financial.

They will acquire PC financial for 1.15 book at closing. The acquisition cost is estimated to be around $800 million and will be financed by the issuance of 7.2 million shares of EQ Bank to Loblaws and some cash. They don't think they specified the amount of cash. That means that Loblaws will own approximately 17% of EQ Bank going forward. They expect the transaction to close in 2026, not more detail than that, subject to closing conditions and, of course, regulatory approvals. EQBank will acquire PC financial products and services, including the PC MasterCard portfolio,

It will also expand the benefits of PC optimum and make EQBank the exclusive financial partner for PC optimum. It gives them $5.8 billion in additional assets and more than $800 million in retail deposits. And the transaction will give them approximately $60 billion in assets, just based on adding what they have right now. Of course, at the time of the transaction closing, maybe it will be higher than that. Who knows? but I wanted to mention that because compared to the smallest of the big banks, which is National Bank, that it's about, National Bank is at $575 billion in assets, so about one-tenth of the size of National Bank if you compare to EQ Bank.

But it definitely places them firmly in the seventh largest bank in Canada. I think ATB Bank is, which is more Western. Alberta only, yeah. Yeah, Alberta Treasury Bench. Yeah, they're not that far behind, but they're very kind of specific to that area where EQ Bank is more present across Canada. So it definitely gives them a larger presence overall. Of course, you can probably argue they're number eight if you take into account Desjardin, which is a financial group, but it's more of the credit union. We call them in Quebec.

I always had the name co-op, but it's a credit unit that quite massive. I think they'd be closer to national bank in size, but aside from that in the true sense of bank, they are now firmly in the seventh spot. So what are your thoughts on that before I give my take in terms of what I think and how this could work out for EQBank? I think it's a pretty good deal, yeah, because it wasn't like the most outstanding quarter, but the stock actually did really well after this because I think it is like It kind of gives them access to a lot of, first off, like, people who routinely shop

at Loblaws. And there's probably ways to, like, leverage that client base to open up EQ bank accounts that probably, you know, they might have had to pay for, like, in terms of marketing, advertising. I mean, we've all seen, like, EQB's ads. Yeah. It's just an easier way to get access to, like, a ton of people in Canada. I mean, you never know.

like Loblaws could give like a bonus for opening up an account and I mean that's a very easy way to go about getting more more clients to Ike bank and I mean La Blah obviously now has an interest in Eiki Bank so they're going to be vested in you know seeing them succeed and I mean obviously like I think La Blah probably thought you know if we give the financial arm to a bank instead of a grocery company they might be able to kind of leverage that and grow it a bit better so I kind of I I like the deal. I mean, it would be hard to not like it. I mean, you can think like you got one of the largest groceries in the company that's now, sorry, in the country, that's not got a huge stake in your company. Yeah, I think it's a pretty good deal for both sides. Yeah, exactly, because I think

one of the big advantages that EQ Bank has always had, which is also a disadvantage, depending how it can be pros and cons, but EQ Bank was a smaller player and did not have legacy branches like the big players. So that gives them a whole lot more flexibility, less overhead caused than the big six banks. So I think that was always an advantage. But again, that being a smaller player also means you have less financial resources overall compared to the big players. So yes, you're more nimble, you're more agile, but you also don't have the same kind of, you know, the same amount of capital behind you that some of the big banks would have. And I think that can really be beneficial when you have a company as important as Loblaws.

I mean, Loblaw is, what, $70 billion in market cab, something like that, just on top of my head. Yeah, so they're pretty massive, and they own, they have vested interest. Like, 17% is not a small stake, so they definitely have invested interest to make that work. Plus, I think the PC optimum thing is probably underlooked a little bit because I don't know about you, but I have PC optimum because most of the times the grocery stores are close So my place are, yeah, there are some of the Loblaws franchises. There are some of the regular brands and also the discount ones.

And obviously, PC optimum, you end up getting some free groceries after a while. And I usually go to ESO because they also take PC optimum. And it's, you know, it's a few dollars here and there, but it adds up. And the fact that they be able to leverage that, it's the largest grocery chain in Canada. I think that's really good. And I guess the last thing for me is the fact that they will get that credit card portfolio, I think is big. Because I think right now they didn't have that. And now someone that wants to fully bank with EQ Bank and wants a credit card, then they can just have it all with them.

And the PC Optimum, again, it's a PC Optimum MasterCard. Same kind of thing. You get some additional points. But I think it will really be able to get some more customer. customers to actually cut all ties with some of the legacy banks. I think it's pretty good for them. Yeah, I think like it's equitable has been a deposit heavy bank for the most part. Like, they rely a lot on deposits and a lot on, say, mortgage lending. I mean, so adding the credit card obviously, you know, becomes a big thing. It kind of diversifies the, the revenue mix a bit.

And yeah, it's, it's a good move, I think. And obviously, most of it comes through shares. So it, you know, it's not costing the company a ton of money. Obviously, you know, there's a bit of dilution there in terms of share offerings, I think. But I mean, I think it's a net good thing for both companies, for sure. Yeah, there's been a lot of banking transactions, huh? Over the last, yeah, like the last year. Like, we'll see if regulators approve it or not. I do hope they do because it gives another option.

And there's been so many, like, massive transactions way bigger than that. And the recent, like, what, one, two, three years, like, if we think about the HSBC one, yeah, HSBC, Canadian Western, Laurentian, Laurentian now, and this, yeah. When you said equitable was the seventh largest, like, I think, like, is there an eighth now? Like, with Laurentian gone, I mean, it's crazy. It's all smaller credit unions and, and, you know, tinier banks. I, like, obviously you can't predict it with 100% accuracy, but I doubt regulators would have it. If they didn't have an issue with like Canadian Western and potentially Laurentian, I can't see them having an issue with this. But you never know. Yeah, we'll have to see. But I know to something

to keep an eye on. But overall, I think it's good. Obviously, though it's going to just bring a bit more competition on top of that, give them. I think they'll still have the same kind of flexibility and being able to launch new products than they have right now. So they keep that flexibility. But I think it makes them a little big beggar, more products available. I think it's a pretty good thing. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience too, until we switched to the new EQ Bank business account. Now, every dollar earns high interest with no monthly fees and no minimum balance. You also get free everyday transaction,

like EFTs, bill payments, mobile check deposits, and 50 outgoing and 100 incoming free interackey transfers. And to sign up quick and fully online, no branch visits because, let's be honest, no business owner has time for that. We use it for our own business and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at EQBank.ca slash business. Want to buy a stock but don't want to shell out hundreds or even thousands for a single share? With QuestTrade's new fractional shares, you can invest any dollar amount and build a diversified portfolio instantly. No delays, no trade fees, no excuses. Want to put $10 into

a stock trading at $100? No problem. Quest trade has you covered. They're the first broker in Canada to offer real-time commission-free trading for U.S. fractional shares in ETFs. It's simple, powerful, and finally available in Canada. Head to quest trade.com to open and fund an account. Use code TCI, and you get $50 to get you started. Winters in Canada can be pretty cold, but they can also be pretty magical. We're thinking about taking a short trip from Ottawa to Quebec. City for the Winter Carnival. My wife and I spent our honeymoon there a few years ago,

so it will always have a special meaning for us. And now with my daughter, she'll also get a chance to appreciate how great Quebec City is. She'll be able to practice speaking French, and I can already picture her lighting up when she sees the ice sculptures or tries snow tubing for the first time. After a full day of activities, I can imagine us heading back to our home away from home on Airbnb, be making a warm dinner, maybe picking up some local pastries for dessert, and just winding down playing some board games with a nice glass of red wine. It got me thinking about hosting our own place. While we'd be away, our home could give another family the chance to enjoy winter loot in Ottawa as it will just be sitting empty while we are away. The nice part is we get

to decide when our place is available and it lets us make a little extra to put towards our next trip instead of having our place just sit empty. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. So let's move on here. You want to do BRP and then we'll finish off with some more banking earnings. Yeah. So BRP actually pretty solid quarter.

I mean, it kind of confirms that K-shaped recovery we've talked about a few times. You know, it's pretty crazy. another company I can think of is like Eritzia, you see like these, you know, a mid-tier fashion company and BRP being like a recreational vehicle company, like obviously, again, like that K-shaped where higher income people are still spending while lowering income people are, you know, struggling a lot. I think it's pretty clear because these vehicles are not cheap. Yeah, if you have assets, you're doing well. If you don't, you're not. That's it. Exactly. Yeah. And I mean, revenue is increasing. So it increased 14%

year every year and earnings are up 33%. So yeah, it's, I mean, I wouldn't say it was the best quarter overall from BRP, but considering the macro environment, like the market really likes it. I think this one is up. I think it's like 120 some percent since April. So it's had a pretty good recovery. Gross margins have started to recover as well. So they're up 210 basis points. So this company had similar issues to Eritzia when Eritzia did that large inventory order back in 2022. So when you get into this situation, you can't move inventory. The only way you can move that inventory is marking it down, which ultimately ends up hitting your margins. So once this is normalized, you generally see a big uptick and margins. And by the look of it, it's kind of

starting out with BRP. And one of the main reasons for that is their inventories. They have started to decline pretty, I don't want to say significantly, but they are declining. So they fell by 17% year over year. And what this means is BRP is going to be able to start pushing out more products because dealerships and they'll start taking more products

and the company's inventory is actually now below pre-COVID levels year-round products which would be their ATVs, their three wheelers, their side-by-sides they grew by 22% year-over-year and the company's side-by-sides kind of outpaced the overall market

which ended up with a 4% increase in market share in the year-round segment. BRP's quarterly reports do have like really good layouts in regards to this. Like they'll segment out each of their products. I kind of show you like how they grew, how they didn't grow, like relative to the industry, things like that, their market share. Seasonal decline, but this was kind of expected.

They're still pushing old inventory through. For example, they reported nearly two thirds of industry retail sales in the seasonal area. So you're talking like snowmobiles or whatever that may be. We're non-current units. So they're just older models. that they're working through eventually once they push all that product out. They can probably start delivering more new models next year and seasonal should see an uptick. So parts and accessories increased by 18% year over year.

The reasoning for this is pretty simple. They said more people are utilizing the vehicles, which leads to more repairs, more servicing. And I mean, if you'll remember, I think we've covered this almost every quarter on the podcast. But for like eight or what was it, four or five straight quarters, they reduced guidance until they effectively just eliminated. It was like six in a row where they could actually reduce it. Yeah, they just kept cutting guidance over and over and over again until they effectively, you know, removed it. Well, now it's kind of, you know, the script has been flipped. They actually bumped their guidance.

So I think they reissued it a couple of quarters ago, but now they did bump it. They expect revenue to come in at the high end of previous guidance. So that's $8.3 billion. They upgraded its earnings guidance from $4.25 per share to $5 per share. So that's a pretty notable bump to earnings. And they mentioned that the retail market will be relatively flat in the calendar year 2026, which would be their fiscal year 27. So this is kind of one of those confusing companies that's already in like the third quarter of fiscal 2026.

Whereas so, you know, calendar and fiscal year. What they did mention though is even with the flat retail market, the inventory de-stocking will have a $500. $500 million impact in terms of revenue next year, like beneficially. Some, I mean, that can just kind of show you, you know, pushing out that inventory and kind of normalizing that, the impact that that can have. And I mean, some might look to, you know, $5 in earnings per share in a $105 stock price and kind of think the company is expensive at 21x earnings.

But we've talked about this a few times on the podcast. The cyclicals kind of work in the opposite fashion. I mean, when the, when the PEs are high, it's often when the company is is cheap. And this is more so because the market, the market doesn't care what BRP is going to earn this year. They care what they're going to earn next year. And they're kind of pricing that in already. So, you know, if forward earnings are expected to increase, which by all indications they are, obviously, I mean, it can change very quickly. But it's not surprising the market is bullish on, you know, future earnings growth.

They're going to price a lot of that in now, which will make the price to earnings look high. Whereas on the flip side, if we get to like a peak environment like COVID where earnings are really high, the market thinks they're going to slow down, it'll price that in and make the P.E. look very low. So, yeah, this is typically the way these work. They're kind of, you know, the reverse of what you would expect. Yeah, yeah, exactly. And I'm just trying to get a graphic for the price earnings data, just so people can have a better idea.

So, yeah, you saw the P.E., which is definitely climbing up here. It looked cheaper when things were selling like hotcakes. Yeah. Just because definitely the profits were through the roof and you have to keep in mind, it's always there's a numerator and denominator, right? So it's always a price divided by the profits. And then the expectations of that, obviously I'm looking at the trailing 12 months here, but you saw that it looked relatively cheap on a trailing 12 month basis. But I think the problem here was like you explained to it, just looking backwards, the earnings were so good that the price as it was declining made the P.E ratio look. really attractive and then it's going it's starting from such a low base right now that I

think you're seeing that is it looks a bit more expensive just because the denominator is so low but as it keeps increasing I'll probably look a little bit more better value but yeah it's a bit counterintuitive that's for sure it is yeah and it happens more with cyclical companies for sure because, I mean, you're going to see such quick, like, peaks and valleys when it comes to earnings. Like, the market is forward-looking in general, but, like, with companies like this, it is very, very forward-looking. They're going to price in a lot of earnings growth in the future, which, again, trailing 12-month earnings for BRP are, I mean, they're awful. I think they've gone from, you know, they were earning 12 or 13 bucks a share during the pandemic to, like, $4 a share now. But, again, it's that, it's that forward, you know, kind of expectation what the market's going to price in.

No, exactly. So, yeah, I mean, it's nice to see it recover. I know a lot of people like that company as an investment, but you always have to be careful. Cyclicals will be cyclical, and don't be surprised when it happens. That's pretty much it, right? Yeah. So let's move on here and finish with some bank earnings. Obviously, bank earnings have been happening last week, this week again.

So talking about the big banks in Canada. Look at TD here. So earnings were down 10% big part because of, of restructuring costs for their U.S. retail business, you'll see that the lines of businesses that will go over that are actually more their operating line of business, those were fine, but it's always the, what's it called the corporate segment? So that's the one, yeah, that's the one that took that in this situation. So earnings for Canadian banking did well, increased 2% over a year.

The U.S. retail performed well, despite those restructuring charges with earnings up 31%. Well, management and income essentially doubled year over year. Old cell banking also delivered some strong net income for the year. I think it almost doubled as well. They set aside $982 million for bad loans, which is about the same as Q3 and less than the $1.1 billion they had set aside last year. Their allowance for credit losses was slightly down versus Q3 and very close to what they did in Q2. So that one, it just looks at the total amount. on the balance sheet compared to the gross loan.

So that one was slightly down, but it's still near a recent peak. So something to just keep an eye on, especially not just for TD, but for all the banks, to be honest. Sloan originations were up 5% in Canada. Deposits were up 4%. So, of course, deposits are the live blood of banks. So you always want to make sure that those at least go up a little bit. Net interest margin was stable for the Canadian business and slightly up for the U.S. business.

They announced that they would be increasing their dividend by 2.8%. So for those dividend lovers, you know, little dividend increase here. They had strategic AI implementation. They implemented approximately 75 AI use cases in 2025 this year, generating about 170 million in value. And I wanted to just mention that because one thing that you hear a lot is a lot of companies are not seeing the return on investment when it comes to implementing AI in their business.

So it seems like they are seeing a little bit of value. So it's something I wanted to mention here on the anti-money laundering front, so the elephant in the room here, they completed most of their remediation actions in fiscal of 2025. So this year for their U.S. business, they reduced their U.S. balance sheet to provide themselves with more flexibility since they have a asset cap in place. And I'm just going to share this here for a joint TCI. And you'll see the graphic here. This is their U.S. retail assets.

So you can see that it has been declining. I can't remember what the exact cap is. I think it was around 550 or something like that, right? Yeah, I'll look it up. I'll look it up, but I can't remember off the top of my head. Yeah, I think it was right around there. So basically, for those not familiar, TD got found of, I don't know if you would say guilty, but basically regulators said that, look, they didn't have proper anti-money laundering practices in place.

There was some money laundering that was done through TD over the last couple of years. It was essentially they were slapped some pretty tight restrictions by U.S. regulators, including, of course, making their anti-money laundering practices better, but also setting an asset cap with no indication as to where that asset. cap for the U.S. business when it will be lifted. So it's basically almost capping the growth of the bank because banks make money on assets. Assets are like loans, for example, that they provide you. So if they can't provide more loans or they can't go above a certain amount of assets, it really emperes their growth. Yeah. So the asset cap was $430 billion, but U.S. dollars. So if you're looking at this chart, this would be Canadian dollars. So it's around, I mean, I just quickly did a currency conversion.

It's around 595 Canadian. So that's why you, yeah, that's why it was confusing. Because when we first seen those numbers, I was like, I'm pretty sure. Yeah, I thought me too. Like I was saying it and I thought, you know what? It kind of feels like it was closer to four. So yeah, I'm showing the chart in USD here. And you can clearly see that they've been training now.

So you said it was 400 billion USD, right? 430. 430. Okay, yeah, there you go. I think they said it at the level it was at the time of the, yeah, kind of ruling or whatever you want to call it. Yeah. So you get in a situation where, I mean, TD, they're going to create that buffer and then

they're obviously going to issue more loans and then they're probably going to have to find some, you know, if they peek it out again, they'll have to find some more like the lowest quality loans, I guess, and kind of sell them off and to create a bit more of a buffer. It's definitely not a good situation to be in because ultimately you want to just be growing these assets, but it's manageable, I guess. But the thing is, is how long is the cap going to last? Yeah, exactly. It's the big issue, but yeah.

And especially then when you start looking at the Canadian business, which is doing well, but what you're seeing in Canada with the big banks is that they're competing pretty hard to trying to get loans up from, especially credit-worthy customers, good customers. And Canada is just not a big market, let's be honest. And for a company like TD that had a big presence in the U.S., it really makes it difficult for them to grow without taking too much additional risk in Canada and I think that could be a bit of a byproduct for this where it could get a little bit dangerous for TD as they may want to be a bit too aggressive on the Canadian side because they want to grow and it could impact a little bit of their

loan quality. I'm not saying they will but I can certainly see the incentive to do that. Yeah. How do I mean the market doesn't really seem to care? Companies up like 70% this year. Yeah. It's crazy. Remember when we were saying not to buy it around the 70% below or whatever the equivalent is when it was last year. So what we were saying like, oh, it approached this with extreme caution and apparently were completely wrong. But to our defense, financials have just performed really well over the last year. So I'm not sure it's especially TD.

But again, I think I would still just place some caution here because I know in the mortgage space, I've talked to a few people like banks are being very. aggressive the big banks to try and keep their clients. Yeah. So clearly, you know, they're trying to keep the good clients, but at some point you're seeing population growth stalled. Like, at some point, like there's just not much growth to be at, right? Yeah. Yeah, I agree. And I mean, like the thing about TD is it's up 70% on the year, but then you also look for two and a half years, it lost 30%. So I mean, it's had a big rebound, but it's just kind of normalizing, I guess, back to that like level that the other banks are at. It just went kind of through a big

Valley, I guess you could say for a couple of years. And I don't think it was crazy to kind of avoid this bank based on the AML issues and like what could happen. I still stick with with what I said. And I mean, I own I ended up selling it right when these issues ended up happening. So I don't have any skin in the game anymore. But yeah, I mean, I, yeah, it's I own other institutions that have that have performed quite well as well. Well, yeah, exactly. Like it's just, I think that's the way I see it. It was just a big risk. And sure, it's performed well. But again, they're basically betting on the Canadian market at this point for growth. So keep that in mind. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience, too, until we switched to the new EQ Bank business account. Now, every dollar earns high interest with no monthly fees and no minimum balance. You also get free everyday transactions like EFTs, bill payments, mobile check deposits,

and 50 outgoing and 100 incoming free interackey transfers. And to sign up quick and fully online. No branch visits because, let's be honest, no business owner has time for that. We use it for our own business and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at EQBank.ca. business. Want to buy a stock but don't want to shell out hundreds or even thousands for a single share? With Questrade's new fractional shares, you can invest any dollar amount and build a

diversified portfolio instantly. No delays, no trade fees, no excuses. Want to put $10 into a stock trading at $100. No problem. Quest trade has you covered. They're the first broker in Canada to offer real-time commission-free trading for U.S. fractional shares in ETFs. It's simple, powerful, and finally available in Canada. Head to quest trade.com to open and fund an account. Use code TCI, and you get $50 to get you started. Winters in Canada can be pretty cold, but they can also be pretty magical. We're thinking about taking a short trip from Ottawa to Quebec City

for the winter carnival. My wife and I spent our honeymoon there a few years ago, so it will always have a special meaning for us. And now, with my daughter, she'll also get a chance to appreciate how great Quebec City is. She'll be able to practice speaking French, and I can already picture her lighting up when she sees the ice sculptures or tries snow-tubing for the first time. After a full day of activities, I can imagine us heading back to our home away from home on Airbnb, making a warm dinner, maybe picking up some local pastries for dessert, and just winding down playing some board games with a nice glass of red wine. It got me thinking about hosting our own place.

While we'd be away, our home could give another family the chance to enjoy winter loot in Ottawa as it will just be sitting empty while we are away. The nice part is we get to decide when our place is available, and it lets us make a little extra to put towards our next trip instead of having our place just sit empty. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. Lastly here, they expect 6 to 8% EPS growth in the next year

with 13% return on equity. The return on equity would be in the middle of the last two years with 2025 being 17% and 20248%. So kind of right in the middle of those. too. And then they also expect their provisions for credit losses to be slightly lower next year compared to this year. So we'll have to see whether that actually materializes or not. It's extremely difficult to project those. So don't be surprised if they do end up higher or they come into the guidance. Banks will oftentimes make some big adjustment just on a quarterly

basis. So that's it for TD. And let's finish here with royal banks. So I guess the the king of Canadian banks, right? Yeah. It's been kind of crazy from Royal Bank over the last while. Like they're growing, I mean, 25% earnings growth, I think they posted like tech stock level earnings growth. It's pretty crazy.

In terms of valuation, like a lot of people might be wondering, like they're posting 25% earnings growth. But, you know, the company's not like, say, moving as much as TD, you know, it's only up 35% versus,

you know, TD 63. But the thing is, is like Royal Bank has not went through, as much troubles. Like if you smooth that out over a five-year time frame, it's kind of up and to the right for a company like Royal, whereas, you know, there's a lot of other banks that have been,

you know, CIB went through it, TD went through it, BMO went through it for a while. So it hasn't been this expensive on a price to earnings basis since 2010. So I think you're paying 16 and 16.3x earnings for Royal. So you would have had to go back to pretty much the financial crisis to get this, you know, P valuation and I mean it's justified at this point compared to the previous results like you're talking again 25% earnings growth return on equity was 17.2% so I mean just to give you an idea we talked about TD there at 13% but many of the you know struggling big banks are are in the 11 to 12% range so I mean the market is paying a premium for Royal and I think another element of it is

you're seeing a lot of these banks are struggling to grow personal lending personal banking in Canada, whereas Royal just isn't. I mean, they had 20% year-over-year growth in that area. Those iPad, they're giving away for opening an account. Yeah. It's crazy. Like I, I mean, you would think for the biggest company in Canada, the biggest bank in Canada, like, it's pretty impressive how much they're growing, like personal lending because I think we talked about Scotia Bank last week. I mean, they're growing Canadian lending. Like, I think net income was up 1%. I think like loans were down, I want to say, with Scotia or at least deposits were flat or something like that. But I mean, it's just you're not seeing those types of results with

Royals. So I think that's why the market is paying so much. The acquisition of HSBC is now expected to have higher than expected synergies. So it looks like they paid a pretty good price. Capital markets up 45% year over year. So you're going to see this with pretty much every Canadian bank right now. The markets are bonkers like wealth management, capital markets, things like that. Provision stayed relatively steady. They did warn of weakness in the GTA. They weren't like as bearish, I guess, towards that with Scotia. Like, Scotia kind of warned it could get, you know, a bit more troublesome. Royal kind of just, they were more muted than Scotia was, but they still mentioned it's, it's a bit of an issue. They raise a dividend by six and a half percent. And in terms of outlook,

they mentioned that provisions will plateau next year and then start to decline in 2027. And obviously this is, this is subject to change. I would imagine the health of the Ontario economy. me in the housing market and the GTA is is a pretty big factor here but yeah I mean it's it's pretty good quarter from from Royal yeah it does make you wonder like loans it's not like loans have been growing like crazy overall for the banks right like I mean well that's yeah that's kind of what I wanted to get into next is is just like I think what's happening like it's difficult to say as to whether or not the banks are just the loan growth and the you know is slow because they're tightening up like maybe they're just not lending as much I'd see like intentionally and the market

thinks that this will boost next year. But like, what can you expect in 2026? Like, I think right now you kind of have a situation where capital markets are propping up soft lending in a big way. Capital markets are notoriously volatile for a lot of these banks. Like, if you look to like a capital market revenue chart from Royal Bank, you'll see declines in 2018 when we had that big correction in 2018. You'll see declines in 2022 during the bear market.

And I mean, I hold some of these banks and like with no. intentions to sell them, but like I can't help but think we might be heading into a bit of a like a reset or potentially a flat year in 2026 because I mean, they've outperformed the SP 500 for two straight years. So I mean, it's not absurd to think they'll take a step back because I think if you have 2026, if you don't see a recovery in lending activity and you see capital markets kind of slow down, you might end up in a bit of a situation where, you know, capital markets can't really prop up to lending side of the business moving forward. Whereas, like, I think, you know, a lot of people are bullish on the fact that, you know, lending activity will pick back up next year, which realistically could be a situation if they decide to start lending more. Like, I think, I don't know if the lending activity is an element of the economy being bad enough that people just aren't borrowing, but just like these banks just tightening up. Because, I mean, if you look at the lending activity and a lot of these alternative lenders, like go easy, say, for example, is still seeing huge activity. Yeah. Which kind of means, like, people are still looking for money. The banks might just not be giving it out.

Yeah, exactly. And they're not going to be giving out to those type of lenders either. So I think they may, there's probably some truth to there. And then there's obviously the, I think the elephant in the room when it comes to the renewal wall. Like 2026 is the year that those five year fixed mortgages that were taking at the peak. Most of them, not most of them, but a big chunk of them are actually coming up this year. Because think about it. Rewind five years ago. We were end of 2020 entering 2021. So 2026 will be the peak year in terms of the renewal wall. There's a high volume of mortgages being renewed. So a lot of people will see a big increase in the mortgage payment, even though rates have come down a bit on the fixed side. Not quite that much, but, you know, they've kind of stabilized over 4%. And then on the variable, it's, I haven't looked, but I feel like with the discount, it's probably around. three and a half three and a half four so they're still going to see massive increases i mean people

were taking mortgages around two percent back then so even i know some people sub two sub that are really next year yeah yeah so i think it could be i don't know if the effect will be positive or negative for the bang because i can see it going two ways right i can or maybe a combination of both I can see it going where people are tighter, so they can't, you know, they have the same loan, but it's a higher interest rate that they had to renew. So there is higher payments. They just can't borrow like as much elsewhere. So it does reduce the amount of capitals that the banks can actually lend out because

there's not enough good borrowers. On the other end, I can see people extending their amortization, which would be essentially good for the banks because then they would increase their interest payments that they receive on those loans right or even potentially people have sufficient equity in their house which is not everyone especially for people who bought during that time but maybe there's a small percentage of them that have sufficient equity men may be tapping in a little bit to make ends meet as a band-aid fix in the short term but I don't know I feel like this may be maybe a tough year for banks or a tougher year.

Maybe you're not crazy, but they may not see all that much growth because of that. Yeah, I mean, I think in 2024, I'm just talking about like a like ZEB, like the BMO equal weight banking ETF. I think it went up 25% in 2024 and then like 37% this year already. So I think it's pretty safe to say that they could see, you know, the relatively flat year again, especially if lending doesn't pick back up. I would imagine they've like kind of factored in those mortgage renewals and they, they've put a lot of that money aside already, but if the situation gets much worse, obviously they'll

have to, they'll have to ramp that back up. But like, but those borrowers will, they won't be able to borrow more money. That's what I'm getting at, right? So it's got to put pressure on those loans, yeah, loan originations, yeah. Mortgage renewals don't really increase the bank's assets. They just, yeah, they're just, they're just renewing. And even if they extend, they're not really increasing the loan. They're just extending it. So the banks, it's good for the bank. They're getting more interest but it's not doesn't increase the yeah the assets yeah exactly and i mean like the market is is very bullish on the banks right now like i think the market is pricing in you know potentially higher earnings through a pickup and lending probably like continued capital market

growth because you know obviously the markets could continue to go bonkers in 2026 but maybe some recoveries and like i don't know if you look at a lot of these banks you know, normally they trade around 11 to 12x earnings. Like a lot of them are like 16, 17, 18x earnings, which is like the market is, is planning another big year for the banks in 2026. But I think the thing is now is the market is pricing in. They have to have a good year. Whereas, you know, a lot of the times over the last few years, like a lot of people

have been really bearish on the banks and they kind of went, you know, over and above and surprised. I think in 2026, I mean, the surprise has been. priced in now. No, you're right. So I guess we'll wrap it up here. We do have some breaking news then. The Fed did decide to lower rates by a 25 basis point.

I believe. Oh, really? Yeah, yeah. So another cut by the Fed. So now the Fed's fund rate is between 3.5 and 3.75%. But again, it sounds like it was a hawkish cut, meaning that they're cutting but I guess they're saying don't get on your high horse too quickly we may not be cutting again that's usually a hawkish cut where a doveish cut would be like

them projecting that it's the economy softening and they're looking at cutting rates even more deeply in subsequent meetings so that that was interesting obviously that's the backdrop with of all of this is Powell's term is ending I can't remember when in 2026 but it is ending in 2026. I think he's got three more meetings or something. Yeah, exactly. So I think it could be what mid-20206 I get if so, like our spring of 2026. So it'll be interesting who Trump tries to get in there.

I'll probably try to get someone that wants to lower raids. But then again, you can pick someone that may tell you they'll want to lower raids, but then they'll get into the role and want to make a point that they don't take direction from the president. So that would not be the first time this happens either because I think they are proud people at the Fed and even if they get the job, they may want to show that they're not a puppet of Trump. So I don't know, it could go both ways, yeah.

Yeah, I think you can tell, like if you look at a one-day chart of the market, you can tell when the rate cut happened because the markets go straight, vertical. Yeah, and you could probably tell when they were a bit hawkish because then they've gave back like a decent amount of it since. Yeah, it's probably, yeah, it's usually the news comes out and then Powell starts talking. And then you see a discrepancy between the two. Yeah, yeah, that's about it. It was just a reaction on the spot literally happened less than, what, like 20 minutes ago.

Yeah. So as we were recording. So if you see those financial assets go up, just send a thank you note to Jerome Powell. That's it. And maybe last thing I want to check is the. Canada five-year bond deal if it's actually if it's actually moving a little bit with the news because usually it moves a decent amount so no I mean unless I'm looking at like maybe not live data but market watch doesn't have it moving very much no no not much of like a slight movement

but yeah nothing significant so I guess we'll call it at that hopefully you enjoy the episode we do appreciate the support like I've said before we are posting some more content on YouTube so definitely subscribe especially if you're not a joint DCI subscribers so we repurpose some of the long form video content into smaller clips on YouTube and usually cleaning up pretty well my video editing skills are getting better so have fun or enjoy the journey of my improving skills or maybe not over time so you'll have to you'll get to see that on YouTube and you can get to see our beautiful faces as well as the two real estate guys Dan and Nick from the podcast we post some videos of theirs as well. Yeah, I'm in better quality camera for me now too. Yeah, exactly.

It won't be so bad, yeah. High definition. So thanks for listening everyone and we will be back on Monday for a regular episode. The Canadian Investor podcast should not be construed as investment or financial advice. The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.