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By Nichola Saminather
TORONTO (Reuters) – Canadian banks are set to post their fourth straight year-on-year quarterly profit drop when they report results next week, the longest decline streak since the financial crisis, on margin compression and declining commercial lending, but flattening loan loss provisions signal a turning point, investors said.
Banks’ profit margins are also expected to get a boost from rising 10-year bond yields in Canada and the United States in future quarters as short-term rates remain near zero. Banks often fund their lending with short-term borrowing or bank deposits.
Analysts estimate the nation’s six biggest lenders – Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia (Scotiabank), Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada – will post an average decline of 4.3% in first-quarter profit from the previous three months and 12% from a year earlier, according to Refinitiv data.
BMO and Scotiabank start reporting results for the three months through January on Tuesday.
Bank CEOs have turned optimistic about 2021, driven by the deployment of coronavirus vaccines, although Canada has seen a slower rollout than some other developed nations.
“Regardless of short-term issues, it’s comforting that we have multiple vaccines,” said Manulife Investment Management Senior Portfolio Manager Steve Belisle. “They’ve good reason to be optimistic versus the worst case scenarios last year.”
First-quarter profit declines will be driven by margin pressure and modest loan growth, Canaccord Genuity Analyst Scott Chan said in a note on Thursday. But profits are set to benefit from strong mortgage growth driven by booming housing demand, and gains in capital markets and wealth and asset management units, Chan said.
Chan said he’s revised earnings estimates up 3%, “supported by our assumption of better credit conditions and continued tailwinds from market sensitive businesses.”
Record provisions for loan losses (PCLs) taken in 2020 mean a significant increase in capital set aside is unlikely during the quarter, said Anthony Visano, managing director of Kingwest & Company, which holds shares in TD, Scotiabank and CIBC.
However, unlike U.S. banks that have already begun releasing some of their reserves back into earnings, Canadian lenders are likely to wait until later in the year to do so, he said.
“As the year unfolds, we should see the vaccine’s assist in terms of the loan growth books … sequentially, we should see improvements, especially when it comes to provisions normalizing,” Visano said.
($1 = 1.2716 Canadian dollars)
(Reporting By Nichola Saminather; Editing by Nick Zieminski)
This ingenious company is bringing art investing to the masses – Financial Post
There’s a reason the ultra-wealthy tend to take up art collecting, and it’s not just because the paintings look cool hanging on their walls. It’s a great investment, a hedge against inflation and other forms of economic volatility , and the right piece can result in huge gains. But, it can also be quite an expensive hobby, and you pretty much have to have millions in the bank in order to take part. Or at least that used to be the case because, thanks to Masterworks , the online platform that brings art investing to the masses, almost anyone can invest in fine art.
Put simply, Masterworks allows investors to purchase shares in some of the great (and most valuable) pieces in the art world, and share in the profits when those paintings are eventually sold. And the pieces available for investment on Masterworks really live up to the platform’s name. They’ve been selected and curated according to myriad different factors, all with the goal of maximizing their value and their earning potential.
Masterworks Art Investing Platform: Request Your Invite Now
On Masterworks , you can purchase shares in “blue chip” paintings by some of the most famous artists of all time that were selected to represent their most mature and characteristic (and thus commercially lucrative) periods. They’re acquired from major auction houses, private collectors and established galleries. And when the time is right, they are eventually sold, and the profits are divided up among the shareholders.
But you don’t have to wait for a painting to sell to make money on Masterworks . On the Masterworks Secondary Market, you can buy, sell and trade shares with other Masterworks investors, making Masterworks shares a high-liquidity asset that allows you to quickly cash out if need be. That isn’t really the case when you own an actual painting and have to chase down a buyer in order to sell.
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If you’re interested in art primarily as an investment, you know it costs a lot of money to buy and sell. Outside of the occasional story about finding a lost Picasso at a garage sale and selling it for millions of dollars, pretty much anyone who invests in art needs to be wealthy in the first place in order to make any money at it. But with Masterworks , some of the most valuable paintings in the world are divided up into shares, making it an art investing platform for the people. And now you can give it a try.
Right now, Masterworks is available by invitation only. But you can request an invitation, and receive a lot more information on the platform’s official site . So if you’re ready to diversify your investment portfolio and acquire shares in a commodity that is a well-known hedge against inflation (not to mention other economic storms that might be coming), check out Masterworks and request your invitation today.
David Tepper doesn't think stocks are a great investment here, but says it all depends on rates – CNBC
Hedge fund manager David Tepper has turned somewhat bearish on the stock market, citing uncertainties around interest rates and inflation.
“I don’t think it’s a great investment right here,” Tepper said Friday on CNBC’s “Halftime Report.” “I just don’t know how interest rates are going to behave next year… I don’t think there’s any great asset classes right now… I don’t love stocks. I don’t love bonds. I don’t love junk bonds.”
The Federal Reserve has been keeping its benchmark short-term interest rate anchored near zero since the start of the pandemic. In recent weeks, officials have indicated they are ready to start tapering the monthly asset purchases, possibly starting in November.
Many believe that rising inflation, which is running near a 30-year high, could put pressure on the central bank to pull back some of the ultra-easy monetary policy soon. Traders have upped their bets that the Fed will move faster than anticipated on rate hikes, with market pricing implying a first rate increase coming in September 2022, according to the CME’s FedWatch tracker.
The founder of Appaloosa Management, whose comments have been known to move markets, said his hedge fund has been “probably too conservative” this year but has done OK because of its bets on commodities and oil.
“We continued to keep that exposure relatively low but keep investing, I think stay invested in the stock market to some extent, but don’t have your highest concentration you’ve ever had,” Tepper said.
Tepper stressed, though, that it’s nowhere near the time to short the stock market, and he still believes equities make a great long-term investment that everyone should own in their portfolio.
The hedge fund manager said if bond yields stay stable after the Fed moves to taper its bond-buying program, stocks could see a relief rally.
“If we are going to sit here with 1.60% [on the 10-year Treasury yield] after the Fed announces tapering, then you could get a rally. There might be a trading rally. You might get 5% to 10% up. I’ll go in and get out,” Tepper said.
The billionaire investor has made a number of prescient calls recently, including foreseeing the market collapse due to the Covid-19 pandemic. Back in February 2020 before the S&P 500 tumbled into a bear market, he warned that the virus could be a game changer for markets and “certainly ruined the environment” for stocks.
In March this year, Tepper turned bullish on the market, saying it’s very difficult to be bearish on stocks. The S&P 500 enjoyed seven positive months in a row from February to August, The benchmark is up more than 20%, hitting a fresh all-time high Friday.
Investment firm head joins Algoma Steel's board – Sault Star
The president and chief executive officer of a New York-based investment firm is a new Algoma Steel board member.
Eric Rosenfeld founded Crescendo Partners in 1998.
He is a master of business administration graduate from Harvard University. Rosenfeld also serves on the boards of Primo Water Corp., CPI Aerostructures, Aecon Group and Pangaea Logistics Solutions, a release says.
He has served on boards since 1998. His first directorship was with Spar Aerospace, the company that developed the Canadarm used in space flights. Rosenfeld also served on the board of beverage maker Cott Corp.
He headed the arbitrage department of Oppenheimer & Co., an investment and brokerage bank, for 14 years before establishing Crescendo Partners.
Mary Anne Bueschkens, Gale Rubenstein, James Gouin, David Sgro, Brian Pratt and Rosenfeld join chair Andrew Harshaw, Andrew Schultz and Michael McQuade, a release says.
“ Our new board members bring critical expertise and diversity to the team,” said McQuade.
The other new members have backgrounds in the automotive, legal and construction sectors.
Bueschkens is a lawyer who has held various roles, including president and CEO of ABC Technologies, an automotive parts supplier.
Rubenstein is a partner in the Toronto-based law firm Goodmans LLP. She is counsel in the firm’s corporate restructuring group.
Gouin is a former head of Tower International, a global manufacturer of automotive products. He also worked 28 years at Ford Motor Company. He held two vice-president roles with the automaker.
Sgro is a senior managing director at Crescendo Partners. The firm’s services include consulting, mergers, acquisitions and capital raising support and private equity investment.
Pratt is a former chair and director of Primoris Services Corp., a parent company of construction and engineering firms. He was also president and chief executive officer and board chair of the Dallas-based Primoris, and its predecessor entity, ARB Inc., from 1983 to 2015. Pratt is a former chair of Legato Merger Corp.
All the board members are independent, except McQuade. He is ASI’s CEO.
The Sault Ste. Marie steelmaker started trading on the Toronto Stock Exchange on Thursday.
– with files from Postmedia Network
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