Q: Does the interest rate may affect the Canada banks profit? Should we still keep them during this time. Many thanks.
5i Research Answer:
Lower rates typically help banks. In addition, lower rates may alternatives (such as GICs) not as attractive when compared with bank dividends, so there can be a sentiment shift benefit as well. But..it is not always so simple. Rates move lower when central banks are concerned about the economy. IF investors start to worry about recession, then bank stocks can certainly be negatively impacted. So far, bank loan losses have been far better than expected, and this has caused the sector to do well this year. Based on current conditions and outlook, we would see no reason to sell banks right now, unless an investor was in an overweight position following this year's run.