The Santa Claus rally has arrived a tad early this year. Driven by the vaccine news, the otherwise muted November has brought more than 11% gains for the TSX Index. However, broader markets face the moment of truth as Big Six Canadian banks plan to release their fiscal fourth-quarter earnings next week.
Canadian bank stocks are the biggest constituents of the TSX Index. One can expect a strong dominance of these stocks on the index movement for the next few weeks. The TSX Index has soared more than 55%, while Canadian bank stocks at large have surged 45% since the respective pandemic lows in March.
Canadian banks to report earnings next week
The biggest among them, Royal Bank of Canada (TSX:RY)(NYSE:RY) will report its quarterly earnings next Wednesday. The sequential growth both on revenues as well as on the earnings front might see some lift.
However, it might take years to reach 2019 profitability levels. The strong performance of the capital market segment will likely remain the bright spot once again. Surging markets added record profits for almost all banks in the fiscal third quarter, and the trend could continue in Q4 as well.
Royal Bank has already set aside $3.5 billion in provisions for bad loans in the last two quarters. Its cautious provisioning will likely curtail the dent in the upcoming quarterly earnings.
No increase in dividends
Canadian regulators have barred banks and financial institutions from increasing dividends or buying back shares due to the economic fallout. Although that might hurt investors in the near term, cash retention is more vital for banks to weather the crisis. Royal Bank will pay a dividend of $4.32 per share in 2020, implying an annualized yield of 4%.
Toronto-Dominion Bank (TSX:TD)(NYSE:TD), the second-biggest bank by market cap, will report its quarterly earnings next Thursday. While a resilient housing market and increasing repayments from borrowers could underpin banks’ earnings, higher deposits and lower interest rates could impact their margins.
TD stock has soared 45% since its record lows in March. It yields 4.4%, higher than TSX stocks at large.
I don’t see any substantial movement in Canadian bank stocks driven by their upcoming earnings. While quarterly earnings growth could remain subdued, their strong balance sheets and attractive dividend profiles might continue to attract long-term investors.
Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), the country’s third-biggest bank, will report earnings on Tuesday. Apart from its earnings, how Scotiabank’s management looks forward to 2021 will be a key driver for its stock. Notably, it is the cheapest stock from the valuation standpoint among the Big-Six Canadian banks.
Broader economic recovery in 2021
A sooner than expected vaccine launch could remarkably alleviate uncertainty and could restart corporate investments, which will once again boost employment and help the economy get back on track.
Certainly, it will take time. But I’m expecting a strong comeback in the second half of next year, assuming the vaccine reaches a large population by then. Limited restrictions and promising changes on the vaccine front should drive the economic recovery.
If you are not looking for substantial gains in the short term, but stability and dividends are your priority, then Canadian bank stocks should be your bet.
Apart from Canadian banks, here are some of the top dividend stocks..
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WestJet halts Boeing 737 Max jet before takeoff after warning light in cockpit – CBC.ca
WestJet temporarily grounded a Boeing 737 Max jet that was supposed to fly from Calgary to Toronto on Friday after a warning light came on in the cockpit prior to takeoff.
Flight 658 was boarded and preparing to take off when a warning light came on.
“After a normal engine start, a standard function of the health monitoring system indicated a potential fault that needed to be verified and reset,” WestJet spokesperson Lauren Stewart told CBC News.
“This process takes time and requires a subsequent engine run, which we do not perform with guests on board [so] in the interest of our guests’ time, we cancelled Flight 658 and its return 665 (Toronto/Calgary), and we rebooked them on the next available flight to ensure a timely arrival in Toronto.”
The airline says passengers were boarded onto a 787 jet and flew as planned within the hour.
Jet in question cleared to fly again
The jet in question has already been cleared and is on track for its next flight on Sunday.
The Calgary-based airline’s fleet of 13 Max jets were grounded for almost two years after more than 300 people died in two high profile crashes of the jets, operated by Ethiopian Airlines and Indonesia’s Lion Air in 2018 and 2019.
WestJet grounded its fleet of Max jets like most airlines around the world did until earlier this month, when flight authorities cleared the jets for takeoff again.
The flight would have been the jet in question’s first flight since being approved for use again, and only the third Max flight at WestJet overall since reintroduction this week.
COVID-19: Nine New Cases In Southern Health, Zero In Steinbach – Steinbachonline.com – SteinbachOnline.com
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- COVID-19: Nine New Cases In Southern Health, Zero In Steinbach – Steinbachonline.com SteinbachOnline.com
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173 new COVID-19 cases, 2 deaths in Manitoba on Friday – CBC.ca
There are 173 new COVID-19 cases in Manitoba on Friday and two more people have died from the illness, the province says in a news release.
More than one-third of the new cases — 64 — are in the Northern Health Region, which has been hit hard by outbreaks in recent weeks.
Manitoba’s five-day test positivity rate is up slightly to 9.3 per cent, the release says, while Winnipeg’s is down to 6.2 per cent.
The deaths are two people in their 80s, the release says; a woman linked to Niverville’s Heritage Life Personal Care Home and a man connected to Winnipeg’s Southeast Personal Care Home.
There are also 56 new cases in the Winnipeg health region, the release says, while the remaining new infections are split between the Interlake-Eastern health region (33), the Prairie Mountain Health region (11) and the Southern Health region (nine).
Those deaths bring Manitoba’s total to 795.
People working in all Manitoba schools will have access to a rapid testing site in Winnipeg starting Monday. The site at 1066 Nairn Ave. opened on Jan. 18 to staff working in five divisions, but is now open to all school staff, the release says.
That includes anyone who works directly with students, including teachers, educational support staff, bus drivers, custodians and child-care staff in school-based facilities, the province said when the first site opened.
People going to that site need to either have symptoms of COVID-19, be identified as a close contact of a school exposure or live with someone who has symptoms, the release says. Appointments need to be made ahead of time by phoning the province’s general appointment line, which is listed on the province’s website.
Hospitalizations of COVID-19 patients in Manitoba are now up slightly to 274, from 268 on Thursday. Thirty-nine of those people are in intensive care, the release says, five more than on Thursday.
An outbreak has been declared at the Pembina Manitou Health Centre and Personal Care Home, the release says.
Previously announced outbreaks are now over at Morden’s Tabor Home, Selkirk’s Tudor House Personal Care Home and Winnipeg’s Deer Lodge Centre Lodge 4 East, West Park Manor Personal Care Home, St. Amant Health and Transition Services and the Carpathia Children’s Centre.
The latest update comes hours before Manitoba’s latest set of pandemic rules come into effect one minute after the stroke of midnight on Saturday. The latest public health orders will allow most Manitobans to have two designated people over as visitors and permit stores to sell non-essential items again.
Those rules will apply everywhere but northern Manitoba, which will remain under the current heavy restrictions because of a spike in cases in recent days and significant COVID-19 outbreaks in several communities.
The military was deployed to Garden Hill First Nation earlier this week to help the community get a handle on skyrocketing cases.
Since Jan. 11, there have been 818 confirmed COVID-19 cases in the Northern Health Region. The massive region is Manitoba’s most sparsely populated, with a 2019 population just shy of 77,000.
As of Friday, that part of the province has a COVID-19 infection rate of 4,225.50 cases per 100,000 people, Manitoba’s online dashboard says — about four cases for every 100 people.
That’s by far Manitoba’s highest infection rate, and more than double the province’s second-highest of 2,087.63 in Winnipeg — or about two in every 100 people.
Places like restaurants and gyms still must stay closed to in-person services.
The rules that take effect Saturday will stay in place for three weeks before being evaluated again.
The changes come more than two months after Manitoba brought in its tightest pandemic restrictions yet, banning most household visitors and barring stores from selling non-essential goods.
Two cases were removed from Manitoba’s total on Friday because of a data correction, bringing the total number of confirmed cases in the province to 28,260, the province’s news release says.
To date, 24,204 people in Manitoba have recovered from COVID-19, while 3,261 cases are still considered active, though health officials have said that number is inflated by a data entry backlog.
There were 2,070 COVID-19 tests done in Manitoba on Thursday, bringing Manitoba’s total number of swabs completed to 461,250 since February.
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