Last May, the securities of Canadian banks retreated significantly as the outlook for an economic slowdown raised fears of a deterioration in the profitability of their operations. The latest information from the Office of the Superintendent of Financial Institutions (OSFI) for the month of May, however, points to a more reassuring situation, which probably justifies the rise in these stocks over the past six weeks.
During this month, loan growth was approximately 11% compared to the previous year. Commercial and government loans benefited from strong demand and rose 17% during the month. Home secured lending continued to weaken, but showed resilience with growth of around 6%. Overall consumer loan growth was around 7%. Canadian banks will close their third quarter on July 31, with results to be released at the end of August.
Canada’s inflation rate fell to 2.8% in June, but that doesn’t seem to shake the Bank of Canada’s belief that it needs to continue to be alert until inflation hits its long-term target of 2% definitively. According to economists at National Bank Financial, Bank of Canada Governor Tiff Macklem’s insistence on the ever-present risks of rising inflation means another short-term rate hike cannot be ruled out. Following a 10e rate hike on July 12, the Bank of Canada’s key rate is now 5%.
Perhaps because it had been somehow telegraphed by the management of the company, the announcement of financing of more than 140 million US from five groups of Quebec investors by Electric Lion was favorably received by stock market investors, despite a dilution effect of around 40% that holders will have to suffer. We must believe that what matters for the moment for investors is the survival of the Saint-Jérôme company, thanks to sufficient access to the financing necessary for its development. But it is also a sign of confidence on the part of the five groups that participated in the financing, namely Investissement Québec, the Fonds de solidarité FTQ, Fondaction, the Mirella and Lino Saputo Foundation, and the Group Mach.
A bad Thursday for You’re here And Netflix. The quarterly results of these two companies among the most popular with investors so far this year have admittedly disappointed as falling revenue per subscriber weighed on Netflix and Tesla missed expectations for its profitability. Both stocks suffered declines of more than 10% following these results. Remember that these securities had certainly had something to do with the outperformance of the NASDAQ, up 34% since the start of the year compared to a rise of 17% for the S&P 500. Could a change in preference on the part of investors now be settling in?
Dollarama found itself in the news again last week when rumors spread that its executives were considering the possibility of acquiring Australian company The Reject Shop, a discount retailer with 376 stores. According to National Bank Financial analyst Vishal Shreedhar, it is only natural that the Quebec retailer be approached by several companies for a possible acquisition, given that it is a solidly capitalized company. That said, although acquisitions are always possible, the analyst believes that this is not necessarily Dollarama’s strategy. He nevertheless believes that acquisitions should be seriously considered by management. Given the success of the Quebec retailer in Canada and in certain regions of Latin America, investors would gladly give it the latitude to explore new markets and export its business model to other countries, according to him.
Canadian stocks at their 52-week highs include SNC-Lavalin, Molson Coors, Sun Life Financial, Onex Corp. And TMX Group. And among those hitting a 52-week low, Neighborly Pharmacy And Theratechnologies Inc..