Author Topic: "Canadian Banks are the Only Sector to Outperform Berkshire Last 25 Years"  (Read 12944 times)

Sunrider

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Well, as someone who's lived in Canadia for a while and now doesn't live there anymore but still has a bank account - it's no surprise. I'm with TD Cluster F&&ck (and yes, I think they also changed my account to fee paying along the way without my knowledge).

It amazes me that Canadian banks continue to persist in the stone ages and that customers haven't come out with pitchforks yet. Where else in the world is it so impossible to accomplish a simple task as moving money from an arbitrary account to someone else's arbitrary account at another bank? In Europe you can even do it cross border ... and world-wide through a wire transfer that you don't need to go to a branch for (the latter is hard to do if you're not in the country and it beggars belief that you'd have to do a wire in branch or otherwise to transfer from, say, TD to BMO).

Customer service helpfully steered me to interac-e shite (works via email, so can't make a transfer to a company's account) or Visa e-pay (not sure who cooked up such a shitty proprietary solution with such low limits and high fees). In Europe I can authenticate myself sufficiently to move multiple tens of thousands via online transfer. Even in the US they now have a transfer system. Canada? About as user-friendly as SÉDAR!

I wonder ... then I remind myself that it is perfectly sensible, if you want to hold on to your customers' money and keep your fees high.

Oh well ... <rant ends>


mcliu

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Did Ireland having something equivalent to CMHC?

Liberty

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Did Ireland having something equivalent to CMHC?

Many places have it. It's called "Moral hazard".
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

rb

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What are your thoughts on investing in these bank stocks?

Big 5 Canadian banks are a cozy, protected oligopoly. They are able to extract outsized rents from the Canadian economy, and their oligopoly isn't going away any time soon.

On the con side, they are quite expensive at present. But that is only a relatively minor consideration; the elephant in the room is the state of the Canadian real estate market. Read this thread for some insight:

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/garth-turner-greaterfool/

This is the case.  They are also extremely well run in general, and conservatively run.  Right now they are expensive but they move in a trading range.  Around Christmas 2015 they could be bought at multiyear lows. 

Ireland's banking sector had about 25 years of similar out-performance before imploding and losing investors 99%-100% of their investment.

And this proves what exactly?  Have you ever tried to get a loan or a mortgage from the big 5,6, 7 Cdn. banks?  They are pretty rigourous.
This pretty much sums it up. They will probably take some hits when the real estate mess up here sorts itself out but they will be just fine in long term.

Also while in the US and other countries the financial space is more fragmented, up here the big banks dominate almost every space aside from life insurance. Banking check, wealth/investment management check, investment banking check, brokerage check, credit cards check. While some banks have been selling their insurance divisions TD remains one of the largest P&C insurers in the country.

By the way the banks' outperformace get even larger if you leave out CIBC where management team after management team can't help themselves from screwing up.

scorpioncapital

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Sunrider, I agree.
The only explanation I have is a kind of backdoor capital controls. Canadian banking system is made stone age for the explicit purpose of creating a switching cost so high it's almost like a capital control to keep money in the country and in the CAD$ currency so that the dollar doesn't collapse even more :)


StubbleJumper

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It amazes me that Canadian banks continue to persist in the stone ages and that customers haven't come out with pitchforks yet. Where else in the world is it so impossible to accomplish a simple task as moving money from an arbitrary account to someone else's arbitrary account at another bank? In Europe you can even do it cross border ... and world-wide through a wire transfer that you don't need to go to a branch for (the latter is hard to do if you're not in the country and it beggars belief that you'd have to do a wire in branch or otherwise to transfer from, say, TD to BMO).

Customer service helpfully steered me to interac-e shite (works via email, so can't make a transfer to a company's account) or Visa e-pay (not sure who cooked up such a shitty proprietary solution with such low limits and high fees). In Europe I can authenticate myself sufficiently to move multiple tens of thousands via online transfer. Even in the US they now have a transfer system. Canada? About as user-friendly as SÉDAR!

I wonder ... then I remind myself that it is perfectly sensible, if you want to hold on to your customers' money and keep your fees high.

Oh well ... <rant ends>



Well, they've had a mechanism to do this for a very long time.  It's called a chequing account.  When you want to transfer money from your account to somebody else's account at a different institution, you write them a cheque which they then deposit.  For smaller amounts of money, you can use an Interac E-transfer.  Given the great strides towards electronic bill payments, there are darned few consumers who write many cheques anymore.  For most people, a landlord-tenant relationship would be about the only situation where a cheque would be required due to the absence of other easily used options for electronic payment.  So that would be perhaps a dozen paper cheques per year for a renter, and fewer than a dozen for non-renters?



Sunrider, I agree.
The only explanation I have is a kind of backdoor capital controls. Canadian banking system is made stone age for the explicit purpose of creating a switching cost so high it's almost like a capital control to keep money in the country and in the CAD$ currency so that the dollar doesn't collapse even more :)


Are switching costs any higher in Canada than in other countries, such as the US?  I can attest to the fact that the existence of payroll deposit and recurring automatic electronic bill payments is a real disincentive to switch banks.  But is it really any easier to switch your payroll deposit in the US than in Canada?  Is it really any easier to switch the electronic payments for electricity, natural gas, water/sewer, insurance, and telecommunications in other countries?  It strikes me that it's probably a real PITA pretty much everywhere.


The Canadian banking system is a nice cozy oligopoly underpinned by a large federal mortgage insurance agency, and aggressively supervised by highly conservative federal banking regulators.  The whole system is about as conservative as I've ever seen, and for the banks, the modest amount of competition makes them nicely profitable without incurring much risk.


SJ

SharperDingaan

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The oligopoly is a privilege; the entry fee is the cost of regulation, and doing what you're told - when you're told. Traditionally, the banks were allowed to expand into other countries; on the understanding that the efficiency gains would be passed on to consumers to defray some of the regulatory cost. Everyone kept an eye on everyone else, & ate well - so long as everyone behaved.

So when one of the chosen few chooses to rip off customers - well beyond the norm .... & it's so bad that employees feel they have to tell the press/regulator; there will be consequences. Prominent heads on a stick, both to shut it down - & deter any others from getting ideas.   

In the age of fin-tech we don't need as big a back office as before, & those jobs are going to be vanishing.
So .... if you want to continue to do business abroad, you're going to bring everything that isn't directly sales related back to Toronto. Yet at a time when leadership is required, we have a bank acting like a thug?       

Thugs get slaughtered.

SD

Ballinvarosig Investors

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And this proves what exactly?  Have you ever tried to get a loan or a mortgage from the big 5,6, 7 Cdn. banks?  They are pretty rigourous.
It proves nothing obviously. It's just a warning that when you see private debt and the banking sector grow at a much faster rate than the economy then something eventually has to give.

Uccmal

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TD is on my watchlist. 

If it hits its 52 week low, I will start buying.... subject to there not being better deals elsewhere (i.e. the long awaited general market crash).   

Its long way from there right now. 

Whatever their problems, which are probably similar at all the major banks, they have a huge moat. 

I am in no way naive to the aggressive sales tactics that push the bounds of legality.  I have had ugly dealings with RBC and Scotia with regards to my MIL.  We instructed each bank to not to try and sell her anything without permission from her Power of Attorney (basically me advising my Wife).  They call her up and do it anyway. 

Watch for every one of these banks to be sanctioned by the regulators, or subject to class action lawsuits.  But as we know from WFC it will amount to nothing in the end. 

GARP tending toward value

SharperDingaan

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Keep in mind that with this bank, the 'controlling mind' has been quietly shifting south of the border for some time. While much of their business may originate from the US (& be expected to grow further), they've made the mistake of thinking they are a US bank.  They aren't.

The brown bank thought they were traders. Then found out they weren't, & still haven't recovered.
The green bank has made a similar type of error.

Hard to imagine the whole sector doesn't pay for this, & the green bank in particular.
We may have done it do - but they are much worse than we ever were;  and its a way more juicy story if you report on them  ;)

We're hoping for another DB ... from some kind of trip up.
No long term damage, but this WFC type of sh1te is going to stop.

SD