The Canadian Investor - SpaceX’s $1.75T IPO & Canadian Banks Keep Rallying

Episode Date: May 28, 2026

In this episode, we break down a wide range of market stories, starting with SpaceX’s potential IPO and what its S-1 reveals about the business. We look at the company’s major segments, including Starlink, launch services, and xAI, while discussing the massive valuation being floated and why investors may want to be cautious around the hype. We also cover Nvidia’s latest blockbuster earnings, the continued strength in AI infrastructure demand, and why the stock’s muted reaction says a lot about how much growth is already priced in. From there, we turn to Walmart, Lowe’s, and Home Depot to see what they are saying about the consumer, higher fuel costs, and the pressure still hitting DIY and housing-related spending. Finally, we discuss the start of Canadian bank earnings season with Scotiabank, including its improving return on equity, lower provisions, and why Canadian banks continue to show resilience despite concerns around the broader economy. Tickers of stocks discussed: NVDA, WMT, LOW, HD, BNS.TO Subscribe 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.

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Welcome back to the Canadian Investor podcast. I'm Simon Berengen back with Dan Kent. we have the fun episode. It feels like earning seasons never ending. We'll be talking about SpaceX's upcoming IPO. We'll also be talking about Nvidia's recent results, which were blockbuster, but the stock didn't move too much. We'll be talking about Walmart, Lowe's, and Home Depot and what they're saying about the consumer and the caution that they're advising in terms of consumer spending, especially because of higher oil prices that we're seeing. And then you'll go over Scotia Bank, so the start of Canadian bank earnings. And if we have time, we'll talk about National Bank.

I'm not sure if we'll be able to get there. So it should be a fun episode, a little bit of everything, some Canadian content, possibly the largest IPO in history coming up as well. So some fun stuff to talk about. Yeah, I think we'll have probably a more in-depth episode on the banks, probably next week because we'll get more of them bunched in. But yeah, the Canadian banks look pretty good right now, to be honest. They've posted some outstanding quarters from what I've seen this morning.

I didn't have a chance to look into BMO, but it should be a pretty interesting episode. A lot of kind of consumer sensitive stocks reporting. And I haven't had a chance to look into this SpaceX IPO. Oh, it's something. It's something. So let's get started. Let's get what's started with SpaceX. Obviously the big news, SpaceX release it's S1.

So an S-1 will be released when a company is going to IPO. It gives essentially an overview of the company, the financials in recent years. So it gives you a much better idea like what's under the hood for a company. Obviously, it's a massive document. So I did not read the whole thing, but I went through the most important section. I'll drill down to what it looks like, what the company makes in terms of its main segments. I'll break it down for people so it's as easy as possible to understand. So the S-1 does give you a good view of the business and how profitable it is, like I mentioned,

but we still don't know what the valuation and the timing of the IPO will be. There is speculation that it could be around June 12 or June 12, but still that hasn't been confirmed. And we are recording this on May 27, so it's possible by the time that you hear this. there's going to be a specific date announced for the IPO. On the valuation front, the number I've seen most quoted was $1.75 trillion in terms of valuation and that they're looking to raise around $75 to $80 billion in capital. Now, that would be valuation specific. I'm not trying the amount of capital raised, though, but I'm pretty sure that would be a record as well.

So the valuation would be a record for an IPO. It would be the largest IPO ever. The company has three main segments, Starlink slash connectivity, which revolves around satellite internet and related connectivity services. So the space segments, so the launch, the rockets, which includes rocket launches, cargo mission, NASA work, defense launches, and their Dragon, Falcon, and Starship development. And then finally, last but not least, XAI is. slash AI, which includes Grog X slash Twitter after the reported AI merger with SpaceX. So essentially,

that's the general overview of what it is. Any comments on that before I drill down a bit more into the numbers here? No, I was just looking at the market caps of like the largest US companies. And this would put it at 9th. It would be around the 9th at 1.75 trillion dollar valuation. Yeah, yeah. So just ahead of, it would be bigger. It would be bigger. It would go right in between meta and Berkshire Hathaway. So yeah, does it get like I haven't paid attention much to SpaceX at all. Like does it make any money? Probably not at this point in time.

Well, let's not ruin the punch, but you are correct. It does not make any money. And it does, it burns a whole lot of money. So in terms of the whole company, I'll break it down just a quick overview for the whole company here and then also give, because I think it's important. It's pretty different depending on the segments you're looking at. So last year, they had $5 billion net loss, and on a free cashful basis, they burnt about $14 billion in cash. So that's quite a bit of money.

Based on Q1, I think it's safe to assume that they'll lose at least $7 to $8 billion this year, possibly more. Again, I'm just kind of doing some rough projections here just based on the Q1 numbers because they had Q1 and then they had the full years, $25 and 2024. It could be more than that, just to be clear. Revenues were $18.6 billion last year. It's hard to say on the revenue side, but if we use the same growth as last year, let's say 33%, again, I'm giving them a lot of benefit of the doubt here. That would come in roughly at $24 billion for $2026,

and they didn't provide any guidance either for this year. So take this with a huge grain of salt. That means that if it high POs with a valuation of $1.7.7. and $5 trillion, as rumored. It would have a price to sells above 70 times. So that's just an idea of how expensive this thing is.

They have about $16 billion in cash on the balance sheet and about $30 billion in debt lease liabilities. Obviously, if the IPO and they raise $75 to $80 billion, then that amount of cash will just be much, much higher. So I think that's something to keep in mind

here. So the first segment here, Starlink connectivity, this is the only profitable part of the business. It's definitely the strongest part of the business. In Q1 revenue was up 32% year to 3.3 billion, while operating income increased 15% to 1.2 billion. For the full year, Starling generated $4.4 billion in operating income. So based on the Q1 run rate, I think it's pretty reasonable that they could probably hit about $5 billion in operating income. this year again these are just kind of general assumptions and projections just based on what i saw the numbers not anything they said for per se in terms of the 2026 number we only saw q1 the second

segment here is the space launch slash rockets that i mentioned the launch segment primarily generates revenue from launch services including commercial satellite launches government work NASA missions and cargo slash crew missions. In Q1, revenue fell 28% year to 619 million. The segment posted an operating loss of 662 million for Q1 compared to 70 million last year. So clearly, they're going to be probably losing quite a bit more cash this year, especially when you're considering that they've lost pretty much as much money in Q1 compared to all of last year for that segment alone, at least on.

the operating front. And then last but not least, X-AI. The X-A-I segment generates revenue from advertising on X, and AI-related products and solutions, obviously, including GROC. In Q1, revenue came in at $818 million. That was up 12.5% in over a year. The issue, again, is expensive. They rose much faster than revenues.

It reported an operating loss of $2.5 billion in one alone, and for context, X-AI add an operating loss. loss of 6.4 billion for all of last year. So with that 2.5 billion loss already in Q1, it's on pace to low past last year's loss by a wide margin. So, I mean, as a whole, I would say at least for me, and people can do whatever they want with their money, obviously. But for me, I'm happy to watch this on the sidelines. It just seems like this is, and this is just my feelings, my intuition, it just feels like they are IPOing in like peak AI hype and, you know, AI slash space as well.

Yeah, exactly. Yeah. If you look to something like MDA in Canada, that would be one of the only, I guess you could say, Canadian space-based stocks. Like that stock is, is ripping as well. It's up 145% year to date. 125 over the last year, five years, 334%. But there's a lot of data that suggests buying a lot of these companies at IPO is just

not a good idea. Even if you go back to when Facebook IPO, it pretty much bombed post IPO. Like if you had bought it and held, you were doing quite well, but initially it was pretty rough. 70x sales is massive. Yeah, it's pretty crazy. It's wild. Let's be.

Yeah. just be honest, it's pretty crazy. I mean, the, the numbers that are there, there's a whole lot of hype. And obviously, it's not any different than Open AI and Tropic. There's a whole lot of hype in the private markets for those businesses too. So keep that in mind. If you really feel compelled to, you know, buy this when it IPOs, I would just say position accordingly because it's going to be volatile. Just keep that in mind. And I would not be surprised if you see some drawdowns of 50% plus. Like it could start ripping. Like I really don't know, but it's going to be volatile. I think that is almost a guarantee in my view. You'd want to buy this if you really want to bet on

Elon Musk. I know he's a polarizing figure. But at the same time, I think it's like most people can agree whether they like him or not that he does, he does have a grand vision. He's a vision. He's a visionary he's to just think about where he brought Tesla versus when it started, I think, close to 20 years ago, roughly, 15, 20 years ago is pretty amazing. Again, whether you love him or hate him, you have to hand it to the guy. He's done pretty amazing when it comes to that company. So keep that in mind. Personally, again, I'll sit on the sideline, probably give it a year, see how things go,

see how the business improves, and maybe then I'll start thinking about starting a position in SpaceX, but there's also the potential merger and rumors of that are starting to trickle in again that they might merge SpaceX and Tesla. So keep that in mind. Again, that's on confirm, but it is also something to keep in mind that could happen later this year or next year. But it does look with the S1 coming out that it will IPO. So yeah, any other thoughts before we move on to another AI plane and Vida? No, just the fact that same as you. I'm going to be sitting on the sidelines. I think for 33% year over year growth, 70x sales,

like there's plenty of companies already on the public market right now growing at that pace, that trade at an absolute fraction of that valuation. But again, I don't really know a lot about this company. I kind of find it's odd that they're lumping in like grok and X and stuff like that. But I mean, I guess it makes sense to get that back to the public markets kind of lumped in with this. But yeah, we'll see how it goes.

that it's Elon realizing that X is a terrible business and trying to lump it in. It might scratch out some money from it now. Yeah, exactly. I mean, I saw in the S one that they wrote off like they had an impairment of over $3 billion for Twitter slash X. Amongst other thing, I'm not sure if it's the only impairment. I saw it quickly as I was doing that. So something to keep in mind.

I guess as the last word here, you really, you're, if you invest in this company, you're betting on, you know, potential. Yeah. Because if the company goes to its potential, they go to March, splice exploration becomes a really lucrative business. Maybe they start doing even mining into space and stuff like that. Like, I mean, the sky is the limit.

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and receive $50. Conditions apply. Let's move on to Nvidia here. So pretty good quarter from what I'm. can see with NVIDIA. Yeah. I mean, the headline numbers, it was a massive quarter from NVIDIA. The stock didn't really budge. I think it actually might have went down a bit, which kind of shows you how much the growth is priced into these companies right now. So revenue grew 85% year over year, earnings by 140%. And data center revenue is not growing

as fast as it was, but it's still up 92% year over year. It seems absurd to say that. But it now sits at $75.2 billion. And just to give you an idea, idea of how mind boggling this is pre-pandemic nvedia made around 1.7 billion a quarter off their data centers so it looks like the company has this was kind of weird because i do check in on nvdia pretty much every quarter it seems like they changed the reporting segments so by the looks of it it will no longer report segments like gaming or automotive separately instead they combine them together into something called edge computing. So they have a data center segment.

Other. Yeah, other. Just other. Edge computing sounds way better. But yeah, they have a data center segment and an edge computing segment. And they break the data center, that break the data center segment down individually now as well. So they do between hypers and everybody else.

And it is interesting to think of as to why they did this. If I were to guess it would be to mitigate fears of concentration risk. So hyperscalers are only around 50% of data center revenue. And, you know, I would have guessed that this was much higher. I would have, I would have guessed that the data center revenue exposure in that front would have been much higher. But 50% to, you know, the alphabets, the Amazon's, whatever it may be. And then around 50% to everything else.

I do get why they did it on the gaming and automotive front. I mean, the name is a bit odd, but they're not going to stop selling. to gamers, but this is not really not a material segment anymore. It's very much an AI play. And the other interesting element is hyperscalor data center revenue only grew 12% while the everybody else segment grew by around 30%. So this does give a pretty good indicator that the hypers are not the only companies driving this AI spend.

It's now starting to spread out to a lot smaller enterprises. And another interesting thing here is Nvidia is still seeing increased growth in terms of rental prices on legacy chips. So this kind of signals, you know, it's a supply side problem right now and not a demand problem. The company increased the dividend by 2,400%. So 24X in a single quarter, I think they went from a penny or something like that to to 25 cents a share. It's still peanuts when you look to the yield, but this company has a free cash flow margin of over 60%. It's printing money right now.

And it's starting to return a bunch to shareholders. They mentioned they're looking to return 50% of free cash flow back to shareholders starting in 2027. And considering the company generates, I think it's around $120 billion in free cash flow. And if the new dividend works out to be around $6 billion, this tells you they're just going to continue to buy back a ton of shares. Guidance for next quarter came in well ahead of expectations, $91 billion versus $87 billion. This guidance assumes nothing moves to China. If they actually do ship some chips to China, this is pretty much just pure upside on the current guidance.

And they mentioned that with AI agents, AI can now do real productive work. This wasn't really the case a few years ago. And they mentioned hyperscaler KPEX could be $1 trillion plus by 2027. AI infrastructure spending will, when I say will, that this is just kind of their estimations, that it will be $3 to $4 trillion by the end of the decade. and the next big thing in AI will be physical.

And I mean, I was pretty skeptical about the AI cycle. I mean, you could go back to earlier episodes, probably last year, but I think it's undeniable now. If we look to companies like Alphabet, we look to companies like TSM. I mean, AMD's going through the roof in terms of price. I wasn't necessarily a bear in that regard. If I was, I probably wouldn't own companies like ASML, TSM. but I was just cautiously optimistic, I guess you could say, but the results are starting to show now. There's definitely, I can't see a demand slowdown anytime soon over the next few years here.

Yeah, I mean, it's gone way past what I thought it would be just a few years ago. So I'll be very honest with that. It still makes me a bit worried about all the hype around it and just Intel is one of the most fascinating. fascinating names to how it's really gone through the roof. I haven't looked at it in the week, but I just assume that it's still well above $100 per share. It went from March 27th. It was $43 a share, and now it is $118. So two months, what would that even be?

I think Intel is probably the poster child for that where they're still facing significant issues. They're still posting losses, aren't they? Yeah, they're still posting losses. they're still not profitable, but just the hype around any kind of semiconductor play just seems to be just through the roof right now. Again, doesn't mean that demand is not high. It's clearly high just based on what everything we're seeing in terms of whether it's Nvidia, Taiwan Semiconductor. You name the semiconductor company or Micron. Micron has gone through the roof just reach over $1 trillion in market cap.

but it does feel like there's a lot of froth in that corner of the market. It's becoming a larger and larger part of the index. I think I was looking at doing my Joint TCI update, working on it. And I think just five of the top kind of semiconductor slash AI plays, so including, I think, was Broadcom, Google, and Vidia. And I think just a couple of our names. So just five names in total, I think I included at meta and Microsoft. off in there, they were more than 25% of the SMP 500. And that's not all the semiconductor plays either.

Yeah, it's the largest concentration, I think, we've ever seen. Yeah. So with the other ones, I mean, it must be over 35, 40%. If you include the smaller ones that are what half a trillion market cap, roughly. So just to give a little bit of context here, I think that's the part that really worries me is how much that part of the market is so concentrated, it doesn't mean that there's not a lot of demand. It just means that there's a whole lot of concentration and it only takes one small thing that doesn't go as plan or just growth is not as strong as expected or whatever it is for things to materially pull back. And

if that part of the market pulls back, it'll affect the whole index. Yeah, because if you look to the underlying companies under all of those, like they're really not, doing all that well. There's a lot of companies in the S&P 500 that are even in, well, I think it would have been back in March where they were in correction territory. It was, it was the largest portion of the S&P 500 in correction territory or negative on the year while the index was at all time highs. And the reason for it is that concentration, but concentration does go both ways. But we did say this last year as well, and we're up a bunch off last year. So who knows if we'll be saying the exact same thing a year from now when the index is even higher. Yeah, like it's,

it's impossible to predict. Exactly. So, well, that's a good overview here of Nvidia. Let's move on to a bit more kind of real economy type of businesses. Walmart. They had a strong quarter with sales up 6% on a constant currency basis, 150 basis point higher than they had previously guided for the quarter. Global e-commerce sales were up 26%. Global advertising business is doing really well. That was up 37% and membership revenue grew 17%. I actually know more and more people that have some of their membership for like food delivery and groceries and they say it's pretty convenient, especially when you have young kids. Yeah, I didn't even use it. We've used Instacart a couple of times. I swore I would never use it, but after I had kids, I've used it a couple of times. I didn't even

know Walmart offered it. Yeah, yeah, they do. So their advertising membership and marketplace services now make up about a third of their operating income. So it is less volatile than the retail overall business. Despite keeping their guidance on change for fiscal year 2027, the market was definitely disappointed on that front. Based on what I saw analysts were expecting Walmart to increase their guidance, they're definitely on the AI side, like pretty much all companies, there's mention of AI in the call.

They said that not only with their sparky shopping agent, but also to make the overall business operation more efficient. Now, what is really interesting, and I talked a little bit about it with Dan Foch on our live, YouTube live, which we had some issues with YouTube, but it was live on X, and we posted it on the podcast. So you may have heard this already. But they absorbed about 175 million additional fuel-related costs, which resulted into a decline of 200,000. 50 basis point or hit to their operating margins of 250 basis point. They said it was the right move for them to absorb the cost or enforce to reinforce a cost with their customers. But the higher costs are definitely real for them and their suppliers. And they said if current fuel prices stay elevated, they expect to see higher retail price inflation in Q2N in the second half of this year.

Fueled was mentioned 28 times during the call, including questions. So definitely on the mind of the management team, but also the analysts. And one interesting thing that they have that they said is they have a large fuel station business, especially in the U.S. And they saw the average fill up by customers drop to 10 gallons for the first time since 2022, which they believe is an indicator of stress, meaning that people are filling up less, whether that's because they just can't afford it or maybe they, they're just hoping that by the next time they go and fill in again, prices will be lower.

I'm not quite sure, but again, 2022 is when the economy was definitely slowing down after the rate hikes that we saw in the first. And I would say in around the middle of 2022 following inflation. The last thing here, it does appear that the case-shaped economy is in full force at Walmart. So they said that higher-income customers are spending with confidence in many categories. while lower income customers are likely fit navigating financial distress. And they said that one thing that probably helped was the Trump administration had, I think they did some, one of their first moves was to essentially do some tax reforms

where people would get or in U.S. customers would or U.S. residents or constituents, I don't know the right term here, would get essentially larger tax refunds. And they think that helped essentially absorb the hit from higher gas prices and help people continue spending a bit more and ease the financial pain that a lot of their customers may be feeling. Yeah. So this is the complete opposite of, I'm pretty sure it was Canadian tire that we went over last week. And they said their highest level of purchasing is from lower income, higher debt consumers. And then Walmart is saying it's from higher income consumers. Probably all those credit cards that they try to push on people.

Yeah. It's like you have like it's kind of crazy. Every time I go, I feel like there's someone like, you know, just behind me a bit like Ghalem and Lord of the Rings. Or like they're kind of, you know they're behind you.

You can't see them, but you know they're trying to kind of sweep in and like make sure you have a credit card with them if you don't have one already. So that's kind of the feeling I get for, Canadian tire. Well, and I mean, if your, if your best customer is, is lower income high debt loads, you're probably better off pushing credit cards on them. But it's interesting to see, like, whether or not this would be Canada wide versus U.S. wide. But that's the first thing I noticed is

just a complete opposite kind of commentary on the health of the consumer. But, yeah, I mean, it's clearly, though, the biggest part of their business is clearly in the U.S. but I, I, It is interesting what they say. I think whether, you know, I think when Walmart says something in terms of consumer confidence, I think you have to listen. It's just such a massive business. I think there's still to consider the largest retailer in the world, right? I think so.

Yeah, they would be up there for sure. Oh. And then continuing on the retail front here. So I'll do this one a little quicker. Just go over again, Lowe's and Home Depot. it's honestly like it's almost the exact same thing. It was very like eerie how similar the results were. So total sales were up 10% for lows. Comparable sales were up 0.6% during the quarter. The exact same as Home Depot here. The average ticket grew 1.5%. I think that was very similar to Home Depot where it was right around 2%. They saw strength in the pro appliance home services.

and online sales. Do it yourself. The IY demand remains under pressure. They said it's a reflection of a challenging housing environment in the U.S. due to elevated rates, higher costs, and low housing turnover. They kept their full year guidance on change with comparable sales being flat to 2%. That flat to 2%, again, exact same guidance as Home Depot. On the tax refund front, they had some interesting insights, like I was talking a bit earlier with Walmart. They said they estimate about 20% of those refunds have already been spent. 50% are sitting in savings with consumers just out of pure caution due to uncertainty. And the remainder has helped offset those recent jump in gas prices. And they said based on IRS data, so the revenue agency in the US, there's about

50 billion left in refund that have not yet been paid. out. So that's interesting that there is some monies. I guess people still haven't filed their income tax returns in the U.S. so there's still that potential money there. And they've been able to manage the impact of higher fuel costs in Q1, but they are starting to see pressure coming from those higher fuel prices. So very similar to what Walmer was saying, they'll work with their suppliers to mitigate the impact and share the burden as best as they can. And then on the Home Depot front, One of the main differences is total sales were up 4.8% versus the 10%. But I believe that, if I remember correctly, Lowe's had an acquisition in there.

They must have. Yeah. So that's why the comp sales are the exact same as 0.6%. Again, the average ticket almost exactly the same here as Lowe's. The pro segment continues to outperform the DIY segment. So the same thing is Lowe's there. And again, the guidance is pretty much the exact. same. So, I mean, you can say what you want, but when you have the two largest kind of home building

retailers in the U.S. that are essentially posting the exact same results, you can tell that it's still a struggle overall for the renovation or home improvement business in the U.S. Obviously, Home Depot has some stores in Canada. I believe Lowe's. They all pretty much exited Canada, I think now. I think we still have Lowe's in Calgary, but I might be wrong on that. I know in Ontario and Quebec there are now Rona's, so they were bought back. Oh, yeah, yeah. They were bought from Rona's and then they were bought back by Rona.

Yeah, they all turned back. A few years. They all turned into Ronas. There you go. So I think I obviously Lowe's will be more U.S., but I don't think you can overlook what they're seeing when the results are. It's crazy how identical they are. You'd think even though they're very, like, they're pretty much the same business, like with some differences around the, you know, the edges.

But I would have thought it would have been a bit more different, but it was crazy. I was double checking numbers. I'm like, my God, this is the exact same thing. Yeah, they're, I don't want to say they're identical businesses. That said, I don't follow lows a ton. I know Home Depot is making some pretty aggressive moves into, like, the distribution space. And they invested a lot in the pro side, I think, like what started in like a decade ago. Like contractors, things like that.

Yeah, contractors. So they definitely have more of a presence there. Yeah, I know Home Depot had mentioned the one insight into the quarter is that big ticket purchases were increasing. So I think they said big ticket purchases, which are over $1,000, a purchase increased by 1%. Yeah. It's not. It's a, who knows, I own Home Depot. It's been a very slow burn for me with this company.

I kind of thought we'd see a turnaround by now. I think we will eventually see one, but it seems like it's being pushed more and more out. Because again, if you look to Walmart, you have people either not filling up on gas or they're filling up half a tank so that they can maybe save five cents a liter or whatever it may be if they do it a week later. So that is not a good sign for home renovation companies. Because if they're not spending money on fuel, they're probably not going in and spending money on a new kitchen, which is ultimately what is going to drive these companies. Yeah, exactly. And I mean, look, it may be an interesting name for those interesting in getting some exposure to that. Clearly, I think, well, just based on the guidance, I think it's going to be a bit of a struggle for sales for the foreseeable future.

You don't guide 0 to 2% 0% to 2% when you think the business is booming. it clearly is it. But when the business is kind of going sideways for macroeconomic reasons, if you think the economy will turn around in the next three, four, five years, buying it in this kind of environment oftentimes is not a bad idea. Of course, this is not investment advice, but usually when the company is not, I wouldn't say struggling, but just going a bit more sideways for a, yeah, flatlining. It's not necessarily a bad time to look at it as a potential.

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Canadian banks reporting? Yep, they reported pretty strong quarter. Earnings were up 33% returns on equity expanded by 280 basis points. But it is, it's important to understand that the second quarter of this year compared to the second quarter of last year when a lot of these banks were setting aside a lot of tariff reserves. That's kind of why you're going to see pretty big growth, double digit growth, probably across every bank.

I looked at national, they grew double digits, Scotia. BMO I have not looked at yet, but they reported a pretty big quarter in terms of provisions coming down. So I would imagine they grew by double digits as well. So you're going to see this double digit growth and the stocks are not reacting all that much. It's just because it was largely expected. And I do think the return on equity expansion is pretty key here. So Scotia has lagged big peers for a very long time. And although it still does lag to better performers like let's say a royal or a national,

it is making progress on the return on equity front, likely due to abandoning a lot of the Latin American strategy and focusing more on what they call the North American corridor, like Canada, US, Mexico. Provision's declined by 13% year over year. But again, we have that easy comparable. If we look to sequential numbers, they increase by low single digits.

By the looks of it, national and BMO reduced on a sequential basis. So there's a bit of a difference there. Scotia's international exposure, I think, in Mexico and some of the other international countries it operates in does leave it always with higher provisions. I think that's been the case for quite a while, but still would have liked to see this decline compared to last quarter. Canadian bank earnings grew 53% year over year. Good chunk of this was due to the base effects that I mentioned from tariff pressures, but there's still pretty strong underlying growth there. So if you strip out the provisions, it looks like the segment is still growing at a 20% plus clip. International earnings came in relatively flat despite double-digit growth in double-digit loan growth in places like Mexico.

Again, this is still a pretty rough spot for Scoti's business, but they're transitioning out of it in a way. It's getting better. It's just not all the way there yet. Capital markets, wealth management is still strong. But again, largely expected in this market net income increased 19% in that area. Assets under management by 18%. They're seeing higher brokerage fees, more flows into mutual. funds, more money into wealth management.

And it looks like net interest margins expanded yet again. I think it was 10% increase. That wouldn't be 10% increase on net interest margins, but just an increase over their previous. And I mean, if the bank can keep putting up results like this, it's hard to imagine they don't get to 14%. That's kind of their midterm ROE target over the next while here. It's definitely been, you know, they lagged for a very long time.

I would argue from like 2016 leading up to like 2024, 2025. But as soon as they started to bail out of Latin America, they kind of started posting better results. But yeah, it was a strong quarter from Scotia. Yeah, and I'm just looking here from Joint TCI, so the allowance for credit losses on the balance sheet. So it is kind of stabilizing here for Scotia Bank. So definitely some improvement there.

It'll be interesting to see if all the banks are kind of seeing some stabilization over there because they were clearly adding a lot, especially in 2024, to those 2025 to those credit loss allowances. So it'll be interesting whether that levels off. But overall, I mean, I've been skeptical for Canadian banks for a long, long time. And especially in the last couple years as the Canadian economy seemed to be rolling over. little more, but they seem to be pretty well positioned. I guess they tend to cater to consumers that should be able to weather the storm a bit better versus obviously lenders like GoEasy subprime lenders that are experiencing more trouble right now. Yeah, they're very different spaces. I mean, most of the big banks exited the spaces that Go Easy was getting into like the automobile space,

things like that. I don't know of a single bank that still does auto loans. There might be one, But yeah, it's completely different, much tighter regulations, much tighter underwriting, like loan process, things like that. But yeah, they're up 20, 20 and a half percent year to date, it looks like. That would be Zeb, like the BMO Equalweight Banks Index. They've, you know, 60 percent over the last year. It's just been a wild run for Canadian banks. And I just think a lot of the double digit growth from this quarter, like earnings growth when you look at it, you would think they'd be up more. but a lot of these banks ran up pretty heavy into earnings.

And they're also now, I believe they're trading at 25 or 30% premiums to historical averages, like what the market has paid for them over the last decade. So we're kind of priced to perfection here for a lot of the banks. So if you see these huge growth numbers and the stock is down or up just a little bit, that's probably why there's a lot of it already priced in, in my opinion. Yeah, and I think we'll keep National Bank for next time. I didn't finish the notes anyway. Yeah, exactly.

I just saw that. So that's okay. Dan only had a few hours sleep last night. Yeah. There's a rough night. There may have been some teething involved last night. I can definitely understand that. So yeah, the final thing I'll say, so I'm with one of the large Canadian banks.

So I don't want to put it on this spot here. So it's one of the big banks. And they are definitely, we only have our mortgage with them. And I must say that they are very aggressive in terms of, trying to sell us some more products. Like for a while now it's died down because I was starting to get real annoyed every time I got a call from them because oftentimes I was just answering out of fear. It was something that, you know, fraud related.

They were calling. So I was answering every single time they were trying to sell me a product. And I feel like that's what they do, right? They have, they try to get a good customer with them for a mortgage or whatever product. and once they have a good customer, they try to upsell them other products. So that's probably one of the best business model for them is just kind of doubling down on those good customers. So I would imagine that Scotia and all the large banks are pretty aggressive when it comes to that, where they probably try to avoid, you know, the lower end customers.

So maybe something like a Canadian tire would do for those credit cards versus them that will have, you know, better customers. they'll still issue credit cards, but the default rate will be much, or the charge off rate will be much lower than another financial institution like a Canadian tire. Clearly, that focuses pretty much only on the credit card portion there.

Yeah, I get, I don't even answer my phone anymore really because it's always just either the bank or the telecom companies trying to upsell you on more products. I have like the call screening because I have an Android, so I just click the call screen. and it'll like pre-screen it and they'll say where they're from and I just end the call. But yeah, I get like multiple calls a day from both the telecoms and the banks just pitching more

products. But clearly it works because I mean, all their Canadian P&C segments are growing. Like more than you would ever. Works for the banks. It doesn't work for the telecom. Yeah. Yeah, the telecom people are. Yeah, it's not working.

That's another story. Yeah. But no, I think that's just my last two cents for this. So you can make sure you tune in next week. we'll try to do all the banks. So wrap up what we saw with all of the Canadian banks in earnings season. So it's coming all out. I think they'll all be out by the time we're work for next.

Okay, tomorrow. They went three today, three tomorrow, which they've never really done. Usually it's one after one after one. Like maybe a couple of days. Yeah, exactly. Three and three. But you're usually all within like a week of each other. Yeah.

So yeah, it's usually pretty condensed. So hopefully you like this episode. It was fun doing it. Just really wide ranging Canadian bank. some big retailers, obviously SpaceX and Elon. I didn't even talk about the compensation package associated with SpaceX, but maybe we can dig into that later on. I didn't have the time to dig into it all that much,

but my understanding it's absolutely massive. So yeah, it's performance base, so I'll give them that. Maybe they'll try to buy eBay and then maybe they'll make it work. I'm just kidding. But thanks for listening. We appreciate all the support. and we will be back on Monday with our 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.