Q: My question is abit more general on the big 6 banks but I own RY primarily.
What is the historical PE multiple range for the banks and RY specifically. I feel like they are getting a bit expensive compared to historical ranges and the yield is now below 3%. If I had more confidence in the Canadian economy I wouldn’t feel so complex to take some profits off the table and maybe rotate into a few non-bank financials. What do you think? Thanks
What is the historical PE multiple range for the banks and RY specifically. I feel like they are getting a bit expensive compared to historical ranges and the yield is now below 3%. If I had more confidence in the Canadian economy I wouldn’t feel so complex to take some profits off the table and maybe rotate into a few non-bank financials. What do you think? Thanks
5i Research Answer:
Canadian banks have historically ranged from 8x to 15x P/E. RY has typically traded higher than the others due to its larger size and consistent execution. In the past decade its range has been 11x to 16x (15.6x now). Certainly on the high side of history. The banks are running as investors realize credit losses are less than expected, and that rates are still likely to go down. But we would be OK trimming a bit, for position size management. Non-bank financials are cheaper, but of course in a bad market may not perform, either. We would not be too concerned, but would side more to caution than FOMO right now.