|Bid||104.11 x 0|
|Ask||104.12 x 0|
|Day's Range||103.65 - 104.40|
|52 Week Range||90.10 - 109.68|
|Beta (3Y Monthly)||1.03|
|PE Ratio (TTM)||11.90|
|Forward Dividend & Yield||4.20 (4.02%)|
|1y Target Est||N/A|
(Bloomberg) -- In a world reliant on smartphone apps, bank branches may no longer be Main Street mainstays, with red velvet ropes between brass stanchions herding customers to tellers behind wickets.But they’re still an important part of banking and, in Canada, the two largest lenders are beating their smaller rivals at drawing more and more revenue from physical locations. Royal Bank of Canada and Toronto-Dominion Bank earn C$14 million ($10.6 million) a year from each of their domestic branches, distancing themselves from smaller competitors in the process.Bank branches are evolving as customers increasingly rely on mobile phones, websites and automated teller machines for routine transactions, with the drudgery of standing in line to cash a paycheck or shift money between accounts largely left to a bygone era.Canada’s banks have reacted accordingly, shrinking branch sizes, adopting the newest technology and turning once counter-bound tellers into roaming advisers armed with tablets to sell high-margin products and mortgages. That’s paying off: All of the big Canadian banks have posted increases in annual revenue per branch in each of the past three years, and sales have soared substantially from a decade ago.“We’re growing our investment in innovative formats: university campuses, hospitals, newcomer centers, which is helping us grow our client base,” Royal Bank Chief Financial Officer Rod Bolger said in a phone interview. “As we have ramped up our leading digital and mobile applications, customers and clients still like to come to branches for advice.”Royal Bank is Canada’s leader, with 1,201 branches across the country -- four more than a decade ago, even with the addition of digital-banking options during that period. Annual revenue per branch has soared 70% since 2009. Technology has allowed branch employees to focus on dispensing advice to customers rather than merely handling routine transactions, according to Bolger.“We continue to free up time for our banking advisers,” he said. “That is helping us to continue to expand our market share, which will then in turn result in higher productivity per branch.”Rival Toronto-Dominion, meanwhile, has 1,091 branches nationwide, slightly fewer than a decade ago. Like Royal Bank, it has seen a surge in per-branch revenue, with a 66% increase since 2009. The ratio for each of bank was calculated by dividing annual revenue from Canadian personal-and-commercial banking by the number of domestic branches at the end of each fiscal year.“People have been speculating about the future of branches, but we’ve been very clear in our strategy that branches are important to us -- they’re an important contact point for customers who need human advice and human touch,” Toronto-Dominion CFO Riaz Ahmed said. “We continue to see them as a very important part of our strategy.”Canadian Imperial Bank of Commerce brings in an average of C$10 million in yearly sales, up about 53% from a decade ago, for each of its 1,024 branches.Customer Conversations“We continue to improve our advisory capabilities and focus on having conversations with clients to understand their needs and to provide them with products and services that they need,” said CIBC CFO Hratch Panossian. “That has had some positive momentum.”Canada’s six largest banks operate 5,578 branches domestically, 2.9% fewer than a decade ago. While the decline isn’t as dramatic as was once predicted by those who thought ATMs and mobile banking would spell an end to bricks-and-mortar locations, branches also aren’t keeping pace with population growth.Canada had 20 branches for every 100,000 adults as of 2018, down from about 25 before the 2008 financial crisis, according to the World Bank. The U.S., in comparison, had about 31 branches per 100,000 adults, down from 35.Bank of Nova Scotia reduced its domestic network the most, trimming 6.9% of its branches from a decade ago, to 949 today. Those branches generate an average of C$11 million in annual revenue, an amount that has climbed steadily in the past six years.“Scotiabank has been adding adviser roles to branches,” spokesman Clancy Zeifman said in an email. “We have also been investing in technologies and tools to help our employees be more productive, including removing manual processes so they can spend more time focusing on our customers.”While branches remain important for Bank of Montreal, CFO Tom Flynn said he expects a gradual decline in both the number of branches and average size amid a push toward digital banking. Canada’s fourth-largest lender has 891 domestic locations, which generate about C$9 million in annual sales on average, a 55% jump from 2009.Smaller Branches“We want to be close to people when they’re doing transactions that are bigger and really important to them,” Flynn said. “At the same time, total branch traffic is down, given the digital migration, and in response to that we have been and will continue to take the average square footage of our branch network down.”National Bank of Canada has the lowest annual revenue per branch, at C$8.2 million for each of its 422 locations, though that’s still 60% higher than a decade ago. The Montreal-based lender, the smallest among Canada’s Big Six banks, may lag behind its larger rivals partly because of its regional focus.“We are located in the province of Quebec, where people are less in debt -- they borrow less,” Jean Dagenais, senior vice president of finance, said in an interview. With property values lower than in other parts of Canada and mortgages smaller as a result, “the volume of loans per branch is lower than a big bank in the Toronto area.”To contact the reporter on this story: Doug Alexander in Toronto at email@example.comTo contact the editors responsible for this story: David Scanlan at firstname.lastname@example.org, ;Michael J. Moore at email@example.com, Daniel Taub, Steve DicksonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Consumers in the market for a Christmas tree can expect to pay more this year, as a shortage of Christmas trees has led to higher prices, thanks in part to the lingering effects of the 2008 financial crisis.The average price per tree reached $78 last year, compared to $37 in 2008, RBC analyst Paul Quinn wrote in a note. The crisis was responsible for the closure of many farms and the under-planting of seedlings, Quinn said. “Most market participants expect the shortage, which began around 2016, to last for several years,” he said.This shortage, along with low labor, has pushed prices higher over the past few years, Quinn wrote. Demand has been also rising, and to keep up with it, artificial trees have been gaining market share, albeit for higher prices.Quinn notes, however, that artificial plants are “less green” as they are not generally recyclable, while real trees are. His top pick for tree is Fraser Fir, which is sometimes called the “Cadillac” of Christmas Trees.To contact the reporter on this story: Aoyon Ashraf in Toronto at firstname.lastname@example.orgTo contact the editors responsible for this story: Brad Olesen at email@example.com, Jennifer Bissell-Linsk, Steven FrommFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.The European Central Bank is done with cutting interest rates despite persistent downside risks to growth, according to a Bloomberg survey of economists.With officials increasingly concerned about the impact of negative rates and President Christine Lagarde about to announce a strategic review, most respondents said monetary policy is on autopilot for the next two years. That’s a turnaround from the previous survey which predicted more easing in June. Economists now see the next move as a rate hike by the first quarter of 2022.Lagarde, who holds her first policy meeting on Dec. 12, is facing mounting pressure from banks and politicians who say subzero rates are damaging the financial system and hurting savers. It suggests her review will have to investigate other ways of using the ECB’s toolkit to revive inflation.“We don’t think they are going to ease, but if they were going to ease the pressure to do something else rather than cut rates is going to be quite high,” said Peter Schaffrik, a global macro strategist at RBC in London. “This is certainly not an environment to pile something on top after the implementation of the last program.”The last program was a package of measures in September, weeks before Mario Draghi handed the presidency to Lagarde. He fought off unprecedented opposition in the Governing Council to lower the deposit rate to minus 0.5%, resume quantitative easing and give banks easier terms on long-term loans.Since then, multiple policy makers have expressed unease over the threat to financial stability as investors turn to riskier investments, a concern that was also at the forefront of the ECB’s own financial stability review. Markets are no longer pricing a rate cut next year.Economists in the survey expect the Governing Council to change its guidance on future policy by September. It currently pledges that interest rates will remain at current “or lower” levels until inflation is entrenched back at the target.“Under the assumption of a gradual, though modest, recovery in economic growth, we think the bar for another rate cut or a step up of asset purchases is currently high,” said Barclays economists Philippe Gudin and Christian Keller.Bond purchases will most likely continue until late 2021, according to survey respondents. They don’t foresee the monthly pace of 20 billion euros ($22 billion) changing until one month before completion of the program, nor are new asset classes such as equities likely to be added to the mix. That may reflect a bet that Lagarde won’t want to reopen old wounds -- QE was at the heart of the dissent over September’s decision.The economic outlook remains cause for concern. While recent data suggest the euro zone’s downturn may be bottoming out and tensions in the U.S.-China trade war may be easing, economists aren’t counting on the ECB making major revisions to its forecasts. They still see a recession as a near-term risk.Strategic ThinkingRespondents said Lagarde’s strategy review will be announced by January -- a significant minority think it will happen next week -- but their expectations are modest. A majority expect the Governing Council to agree to flexibility around the inflation goal, allowing price growth to overshoot or undershoot for a while.They were split on whether the current target of “below, but close to, 2%” will be tightened. Some policy makers argue that phrasing risks leaving inflation too weak, and would prefer to set it at precisely 2%.A quarter of respondents expect an agreement on more transparency in the decision-making process with policy makers voting on measures and those votes being published.Climate ConflictLagarde has already made clear that the review will also consider how the ECB should react to climate change, an issue of rising global importance but a controversial one for central bankers. She and some of her colleagues have tried to temper expectations, saying price stability remains the key objective.The survey suggests that climate won’t become a factor in setting monetary policy over the next 12 months. Rabobank economists Bas van Geffen and Elwin de Groot don’t expect the ECB to set any specific targets, though they could eventually exclude the bonds of polluters from QE “in an attempt to win over some of the general public.”TLTRO TimeThe morning of Lagarde’s policy meeting will also reveal how banks are responding to the ECB’s program of three-year loans, with the takeup of the second round of offerings. Respondents predict demand will be 120 billion euros.To contact the reporters on this story: Piotr Skolimowski in Frankfurt at firstname.lastname@example.org;Harumi Ichikura in London at email@example.comTo contact the editors responsible for this story: Paul Gordon at firstname.lastname@example.org, Jana RandowFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.The pound touched the highest level against the euro in more than two-and-a-half years as traders stepped up bets for a Conservative victory in next week’s election.It advanced against most major peers as polls showed the ruling Tories holding their lead over Jeremy Corbyn’s left-wing Labour Party. Sterling earlier reached a seven-month high against the dollar as U.S. President Donald Trump’s visit to the U.K. unfolded relatively smoothly, defying speculation his presence could undermine Prime Minister Boris Johnson.Investors see a Conservative majority on Dec. 12 as the most market-positive outcome, as it would allow Johnson to push his Brexit deal through Parliament in time for next month’s deadline and move on to the next phase of talks with the European Union. Trump’s visit had been seen as a risk for the Conservatives, who face questions over how the National Health Service would fare in any future trade deal with the U.S.“With just over a week to go, sterling remains highly influenced by the polls day-to-day, but we may also be seeing some relief that Trump did not toss a grenade into the U.K. political system during his remarks,” said Ned Rumpeltin, European head of currency strategy at Toronto-Dominion Bank. “A break above the October high at $1.3013 may open the door for a test of $1.3185.”Despite confidence in a Conservative win, some traders are protecting themselves against a fall in the pound over the next week on speculation it has rallied too far, too fast. One-week risk reversals on the pound-dollar, a barometer of sentiment and positioning, show investors are the most bearish on sterling since October.The pound gained as much as 0.9% to $1.3109, the highest since May 7. It rallied as much as 0.8% to 84.58 pence per euro, the strongest level since May 2017. The currency has acted as a barometer of political risk throughout the Brexit process and has recovered about 9% against the dollar since hitting an almost three-year low in September, on hopes of an end to the uncertainty.Royal Bank of Canada sees a 60% chance of a Conservative majority next week, leading to the “near certainty” of Brexit at the end of January on the terms of Johnson’s deal. Under a Labour-led coalition, meanwhile, “almost all roads lead to a second referendum, to which we would apply a 60/40 probability of a vote to remain,” Adam Cole, chief currency strategist, said in a note.Pollsters say this election is a tough one with voters prone to switching parties as Brexit disrupts traditional allegiances. Surprise results in the Brexit vote and the last election also mean such surveys are seen as less reliable.For Credit Suisse, a sizable majority for Johnson’s Conservatives is required to continue the currency’s rally. The currency looks vulnerable after the Dec. 12 vote unless the Conservatives win a “solid” majority of 40 seats or more, according to strategists including Shahab Jalinoos.Data from the Bank of England last week showed foreign investors selling U.K. government bonds in October at the fastest pace since February. That month saw the U.K. prime minister secure a last-minute Brexit deal and extension to the deadline, before Parliament voted to back his bid for a December election. Gilts, which have acted as a haven from Brexit risk, slipped to send 10-year yields up four basis points to 0.71%.(Adds context on options in fifth paragraph, updates pricing.)\--With assistance from Vassilis Karamanis.To contact the reporter on this story: Charlotte Ryan in London at email@example.comTo contact the editors responsible for this story: Dana El Baltaji at firstname.lastname@example.org, William Shaw, Michael HunterFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Dwindling dealmaking and testy markets caught up with Royal Bank of Canada, leading to the company’s first quarterly profit decline since the start of 2018.The bank’s capital-markets division had its worst quarter in two years for profit and revenue, with lower investment-banking fees and higher provisions causing a 12% earnings drop for the unit. The decline at RBC Capital Markets, which accounts for about a fifth of the bank’s overall profit, undercut gains in consumer banking and pushed fiscal fourth-quarter earnings below analysts’ expectations.“This was a rare miss for Royal,” Barclays Plc analyst John Aiken said in a note to clients. “Capital markets earnings were down on the back of lower advisory fees as well as higher provisions and expenses.”RBC Capital Markets was hurt by a tough year for dealmaking, with a 15% decline industrywide in the value of mergers and acquisitions and a 6% drop in equity financings hurting fee pools. At Royal Bank, investment-banking fees fell 17% to C$428 million ($322 million) in the period, the lowest since the first quarter.“Corporate investment banking was impacted by an industrywide decline in fee pools as some clients stayed on the sidelines given ongoing economic uncertainty,” Royal Bank Chief Executive Officer Dave McKay said on a conference call Wednesday. “Our results were further impacted by delays in the completion of deals in our pipeline.”The company’s shares slumped 2% to C$105.05 at 9:46 a.m. in Toronto. They have risen 12% this year, in line with the gain for Canada’s eight-company S&P/TSX Commercial Banks Index.Trading revenue was C$706 million, the lowest in a year. RBC Capital Markets also set aside C$78 million for provisions, more than double the amount a year earlier and up 39% from the third quarter.Overall, Royal Bank’s net income slipped 1.4% to C$3.21 billion in the three months through Oct. 31, its first decline since the first quarter of 2018. Adjusted per-share earnings were C$2.22, missing the C$2.27 average estimate of 14 analysts in a Bloomberg survey.Royal Bank still ended the year with profit of C$12.9 billion, extending a record streak that stretches back to 2011, though the pace of earnings growth is cooling. This year’s 3.5% earnings increase marked the slowest annual growth for the Canadian bank in a decade.Also in the report:Earnings from Canadian banking, the company’s biggest unit, rose 6.3% to C$1.56 billion in the quarter.Royal Bank is showing continued strength in its domestic mortgage business, which is the largest among Canada’s big lenders. Domestic mortgage balances rose 7.3%, the biggest year-over-year increase since 2016, to a record C$265 billion.Royal Bank’s $5 billion takeover of City National in 2015 has helped lift revenue over the past four years. Profit from wealth management rose 32% to C$729 million, partly due to a C$134 million gain in the quarter from selling the private debt business of BlueBay Asset Management.The investor and treasury services division had a 71% decline in earnings to C$45 million after the bank pursued a “repositioning” of the business that included C$83 million in severance costs in the quarter. Royal Bank has pared roles in Europe and reduced its footprint in Australia as part of what McKay called a “quick pivot” into Asia.McKay announced during Wednesday’s call that Chief Administrative Officer Jennifer Tory is retiring “shortly.” Tory previously served as group head of personal and commercial banking.(Updates with CEO’s comment in fifth paragraph, shares in sixth.)To contact the reporter on this story: Doug Alexander in Toronto at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, ;David Scanlan at email@example.com, Daniel TaubFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
"We did see a number of large marquee deals move from Q4 of 2019 to Q1 of 2020," CFO Rod Bolger said in an interview. "So we do have a strong backlog as a result, going into 2020." Capital markets accounted for 18% RBC's net income. Gabriel Dechaine, an analyst at National Bank of Canada Financial Markets, said the division's woes are far from over.
(Bloomberg) -- Oil rose the most in more than a week as traders sifted for fresh signals of whether OPEC and allied crude producers will tighten supplies when they meet later this week.Futures settled 1.4% higher in New York on Monday. Iraq has been hinting that the so-called OPEC+ group may shrink output again, contradicting other cartel members insisting deeper cuts are not in the cards. Money managers boosted bets on a price rally to the highest in six months.“The OPEC comments are unique to oil and keeping the market in the green,” said Robert Yawger, futures director at Mizuho Securities USA LLC in New York.Hedge funds increased their net-bullish position on the U.S. benchmark crude, or the difference between bullish and bearish bets, by 15% to 103,790 contracts, the U.S. Commodity Futures Trading Commission said on Monday.Long-only wagers rose 12%, while shorts dropped 14%. The report was delayed from its usual Friday release because of the Thanksgiving holiday in the U.S.Earlier in Monday’s session, futures surrendered some gains in response to a surprise decline in U.S. construction spending and a fourth straight monthly contraction in American manufacturing activity.For more, listen to this mini-podcast on the Dec. 5-6 OPEC+ eventAdding to the gloomy data was a report that U.S. President Donald Trump was ready to hit China with stiffer tariffs if efforts toward a trade truce between the world’s two largest economies falter. Crude still hasn’t recovered from Friday’s 5.1% slump that was the worst in 2 1/2 months.West Texas Intermediate for January delivery settled up 79 cents to $55.96 a barrel the New York Mercantile Exchange.Brent for February settlement rose 43 cents to $60.92 on London’s ICE Futures Europe Exchange, and traded at a $5.01 premium to WTI for the same month.Also see: OPEC+ Gambles That U.S. Shale’s Golden Age Is OverTo contact the reporters on this story: Sheela Tobben in New York at firstname.lastname@example.org;Carlos Caminada in Calgary at email@example.comTo contact the editors responsible for this story: David Marino at firstname.lastname@example.org, Joe Carroll, Carlos CaminadaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.Australian central bank chief Philip Lowe laid out his cards for unconventional policy: A government bond-buying program is an option at a 0.25% cash rate, but the threshold for such stimulus hasn’t been reached and is unlikely to be in the near term.“In my view, there is not a smooth continuum running from interest-rate reductions to quantitative easing,” Lowe, who has lowered the benchmark rate three times since June to 0.75%, said Tuesday evening in the text of a speech in Sydney. “It is a bigger step to engage in money-financed asset purchases by the central bank than it is to cut interest rates.”The governor’s highly anticipated address came as speculation mounts that the Reserve Bank will be forced to turn to unorthodox measures as it struggles to push down unemployment enough to revive inflation. This view has been reinforced by government resistance to deploying fiscal measures to support the economy as conventional rate ammunition runs low.In his speech to Australian business economists, Lowe set out the conditions under which QE could be deployed. It would be considered if there were “an accumulation of evidence that, over the medium term, we were unlikely to achieve our objectives” under current circumstances, he said.“In particular, if we were moving away from, rather than towards, our goals for both full employment and inflation, the purchase of government securities would be on the agenda of the board,” he said. “In this world, I would hope other public policy options were also on the country’s agenda,” he added, a thinly veiled reference to fiscal measures.The Australian dollar rose for the first time in five days after Lowe’s comments, gaining as much as 0.2% to 67.95 U.S. cents.In his speech, the governor distilled an international report he’d overseen that reviewed the experience of unconventional policy tools. He then looked at how these might apply to Australian financial markets and the economy.His observations included:negative rates are “extraordinarily unlikely” in Australiathere was no appetite at the RBA for outright purchases of private-sector assets in a QE program“a package of measures” works best with unconventional policy, and clear communication “enhances credibility”Lowe said “that if -- and it is important to emphasize the word if -- the RBA were to undertake a program of quantitative easing,” it would buy government bonds in the secondary market.An important advantage of this “is that the risk-free interest rate affects all asset prices and interest rates in the economy,” Lowe said. “So it gets into all the corners of the financial system, unlike interventions in just one specific private asset market.”It would also have “a signaling effect,” with the bond purchases “reinforcing the credibility” of the RBA’s commitment to keep the cash rate low for an extended period.Insulated EconomyAustralia was among the few developed nations that avoided the financial meltdown in 2008 and global recession the following year. A combination of rapid fiscal and monetary response and China’s stimulus program helped insulate the economy. Now the RBA has returned to the community of developed market central banks as it considers bond purchases.“Our current thinking is that QE becomes an option to be considered at a cash rate of 0.25%, but not before that,” Lowe said. At 0.25%, the interest rate paid on surplus balances at the RBA would already be at zero given the corridor system the central bank operates, he said.Still, for all his discussion and dissection of unconventional policy -- and speculation from Citigroup Inc. and JPMorgan Chase & Co. that the central bank would move to QE next year -- Lowe sought to pour cold water on the notion.“The threshold for undertaking QE in Australia has not been reached, and I don’t expect it to be reached in the near future,” he said.The RBA is forecasting growth to accelerate to 3% in 2021, helping push down unemployment and lift inflation. Lowe said this scenario suggests the economy is moving in the right direction, albeit gradually.Lowe said the RBA board recognizes the limitations of monetary policy and is keeping the medium-term perspective focused on maximizing Australians’ economic welfare, the third leg of its mandate.“There may come a point where QE could help promote our collective welfare, but we are not at that point and I don’t expect us to get there,” the governor said.(Updates with market reaction.)To contact the reporter on this story: Michael Heath in Sydney at email@example.comTo contact the editors responsible for this story: Nasreen Seria at firstname.lastname@example.org, ;Malcolm Scott at email@example.com, Michael S. ArnoldFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- The manager of some of the largest investment funds in Canada is favoring European and Asian stocks over North American.Sarah Riopelle, senior portfolio manager at RBC Global Asset Management Inc., boosted her equity allocation by 2 percentage points to 59% over the past month as she shifts her focus to markets outside of the U.S. and Canada.“Valuations are very cheap, reasonable within Europe and fundamentals seem to be improving,” Riopelle, who oversees funds managing about C$130 billion ($100 billion), said in an interview at Bloomberg’s Toronto office.More than one million Canadians are invested in funds she’s responsible for at the asset-management arm of Royal Bank of Canada, the country’s biggest bank by assets.The price-to-earnings ratios for European and Asian benchmark equity indexes are at 14.5 and 13.7 times respectively, compared with 16.2 for the U.S. That coupled with improving economic indicators, monetary stimulus and the steepening of yield curves propelled these international markets to the forefront. Geopolitical concerns in Europe have also eased with the chances of a no-deal Brexit dropping.Riopelle joins other strategists who have recommended buying euro-zone equities, citing the valuation discount and growth recovery prospects. EPFR Global data shows the fourth week of inflows for the region’s equity funds. Last week, the largest exchange-traded fund focused on European equities posted its biggest inflow since June 2017 in one session, according to data compiled by Bloomberg.Portfolio flows to Asia also surged in recent weeks, pushing year-to-date equity inflows to the region’s emerging markets excluding China to about $23 billion.After peaking at 61% two years ago, the funds had cut stocks “very gradually” to 57% this summer. “We are seeing signs that there’s some improvement in the economic metrics that make us a little bit more comfortable with a higher equity allocation. So we’ve been adding to stocks in two different trades,” Riopelle said.She still sees value in U.S. stocks:“We still think the U.S. market can generate positive returns over the next 12 months.”On the long list of risks that Riopelle and her team monitor, protectionism and U.S.-China trade are a big focus. While U.S. politics hog the headlines, investors aren’t paying as much attention to it, she said. Canadian investors frequently ask about the housing market, interest rates and oil prices with half of the nation’s benchmark index heavily weighted to financials and energy stocks.Riopelle oversees multiple funds under the Select banner, including the RBC Select Balanced Portfolio, the biggest investment fund in Canada with C$37 billion of assets. It’s returned 12% over the past 12 months, beating 88% of its peers, according to data compiled by Bloomberg.Staying CompetitiveAs passive investing becomes increasingly popular, she’s also looking for new sources of alpha including private markets, which managers started entering about a year ago. The firm closed the first tranche for its RBC Canadian Core Real Estate Fund this month, raising C$1.25 billion, and has a C$8 billion mortgage business that she believes are good sources of alpha for clients.“The traditional model of a fundamental portfolio manager picking stocks -- it’s going to be harder and harder to support that going forward,” she said.To contact the reporter on this story: Divya Balji in Toronto at firstname.lastname@example.orgTo contact the editors responsible for this story: Madeleine Lim at email@example.com, Jacqueline Thorpe, Vincent BielskiFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of September […]
(Bloomberg Opinion) -- Advent calendars are bang on trend right now, and Tiffany & Co. is selling one of the most indulgent ever. For $112,000, lucky recipients can open little blue windows to reveal bangles from its Tiffany T line, delicate floral earrings, silver novelties and perfume.Reflecting the sheer luxury of it all, LVMH Moet Hennessy Louis Vuitton SE has made a revised proposal to buy Tiffany at $130 per share, valuing the U.S. jeweler at about $16 billion including assumed net borrowings.Its previous approach at $120 per share was too skinny. At the higher level, both sides stand a chance of getting a nice gift in the countdown to the holidays. LVMH should be able to make a return on investment that exceeds the target’s cost of capital. Tiffany investors would receive a 32% premium to the price of the company’s shares before Bloomberg News revealed the initial approach.At $130 per share, LVMH will probably want to increase Tiffany’s operating profit contribution to around $1.5 billion in order to generate a 7-8% post-tax return. Given the French group’s scale and track record, that’s feasible.LVMH has more than doubled sales at Bulgari, which it acquired in 2011. But the Italian jeweler is a misleading benchmark: An equivalent feat at Tiffany looks ambitious given that it’s a much bigger company.Analysts aren’t anticipating much growth for Tiffany’s sales this year, according to the consensus of Bloomberg estimates, but revenues are expected to increase about 4% in 2021 and 2022. Deborah Aitken of Bloomberg Intelligence puts the long-term growth of the jewelry market at 5% a year. LVMH expanded its overall group sales in the third quarter at about three times the industry median, Aitken notes.On that basis, it has scope to outperform the jewelry market, too. To achieve this, LVMH would likely accelerate Tiffany’s retail expansion in Asia. With its financial clout, it could also turbocharge product development, and back new styles with more muscular marketing. Meanwhile, it could better fulfill Tiffany’s broader potential in lifestyle segments, such as fragrances and watches.So a more realistic forecast would be that under LMVH, Tiffany’s sales could grow a bit, but not much faster than the market — say 7% per year. After five years, sales would be 40% higher than this year, or around $6.3 billion.Margins would have to climb to 23% to hit the profit hurdle. Again, that’s plausible. In the short term, profits could well take a hit, as the new owner invests in products and stores. But with analysts at Royal Bank of Canada estimating Cartier’s operating margin at comfortably over 30%, and Van Cleef & Arpels and Bulgari each in the low-to-mid 20s, there is potential to lift Tiffany’s margin, which is anticipated at near 18% this year.Each side has something to gain from a transaction. For LVMH, that’s dominating the market for jewelry. For Tiffany, it is avoiding the tricky task of executing a turnaround in a U.S. recession on its own.The U.S. group’s strategy, including introducing new designs that appeal to younger customers, is a sensible one. But it has yet to deliver fully, and that’s before any sign of a downturn. If its suitor walks away, it would likely struggle to convince investors that it can maintain the share price around current levels without takeover interest. It was trading at $98.55 before LVMH’s approach.With the two sides entering talks, Tiffany will be pushing for an even higher price. Analysts at HSBC see potential for a deal at $135 per share. LVMH shares fell 1% on Thursday.But with no signs of a counter bidder emerging right now, LVMH Chief Executive Officer Bernard Arnault has the upper hand. Just because he can afford it doesn’t mean he should be as extravagant as one of those advent calendars.\--With assistance from Chris Hughes.To contact the author of this story: Andrea Felsted at firstname.lastname@example.orgTo contact the editor responsible for this story: Melissa Pozsgay at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
A look at the shareholders of Royal Bank of Canada (TSE:RY) can tell us which group is most powerful. Institutions...
The U.S. is home to literally thousands of dividend payers, which would seem to eliminate the need to look elsewhere for income. But there's a convincing case to be made for at least a couple dozen Canadian dividend stocks.Newer income investors often look for the highest-yielding dividend stocks. They see a 7% yield as being better than 6%, 8% yields superior to 7%, and so on. But that's a much riskier proposition than it seems; sometimes, high yields are indicative of a troubled stock or company.A safer approach is selecting companies with more reasonable current yields that consistently grow their payouts over time. Here in America, many investors look to the Dividend Aristocrats - a group of 57 dividend stocks in the S&P; 500 that have improved their annual payouts for at least 25 consecutive years. But America isn't the only part of the world with Aristocrats. Canada, for instance, has 82.The Canadian Aristocrats' standards aren't as stringent as those of their U.S. counterpart. To qualify for the Canadian Dividend Aristocrats, a stock must be listed on the Toronto Stock Exchange, be a member of the S&P; Canada BMI (Broad Market Index), increase its annual payout for at least five consecutive years (it can maintain the same dividend for two consecutive years) and have a float-adjusted market cap of at least C$300 million.We've trimmed down that list to 25 Canadian dividend stocks that are best suited for American investors. The following 25 Canadian Dividend Aristocrats trade on either the New York Stock Exchange or Nasdaq, and have increased their dividends annually for at least seven years. SEE ALSO: 20 Dividend Stocks to Fund 20 Years of Retirement
(Bloomberg Opinion) -- Like expensive gems, luxury goods companies have scarcity value. If Bernard Arnault’s LVMH Moet Hennessy Louis Vuitton SE is allowed to get its hands on Tiffany & Co., the American jeweler is unlikely to come up for sale again. That’s something LVMH’s biggest rivals, Kering SA and Cie Financiere Richemont SA, might want to consider carefully.Financially they could both afford to make counterbids for Tiffany. An offer from either Cartier-owning Richemont or Gucci-owning Kering at the $120 per share price proposed by Arnault would lift their net debt to about 2.5 times Ebitda. That’s not too much of a stretch. Kering also has a 15.7% stake in sportswear maker Puma, worth about $1.8 billion, which it could reuse on something more promising.Both companies are no doubt extremely wary of taking on someone with such deep (and well-tailored) pockets as Arnault. But it’s a hard fight to sit out. Of the two, Richemont has most to lose from an LVMH-Tiffany tie up. The combined Franco-American group would take the Swiss giant’s position as the global leader in luxury jewelry, according to Bloomberg Intelligence.Arnault has a track record of turbocharging the brands he adds to his stable. Take the jeweler Bulgari, which has more than doubled its revenue since being bought by LVMH in 2011, according to analysts at Royal Bank of Canada. If LVMH repeated that trick with Tiffany, it would seriously challenge Richemont’s flagship Cartier brand.It would be a leap for Richemont to take on a lot more debt, especially when it’s still integrating the acquisition of online retailer Yoox Net-a-Porter and is developing a web joint venture with Alibaba Group Holdings Ltd. But these distractions might explain Arnault’s tactics in striking now for Tiffany.As for Francois-Henri Pinault’s Kering, it has lived with higher leverage in the past, although it tried to stick within a range of 1-2 times Ebitda. It certainly has room to expand in jewelry. Along with watches, the category accounted for just 6.8% of its sales in 2018. But many of Tiffany’s products are in the so-called “accessible” luxury segment (sometimes priced at about $1,000 or below), which Kering has been moving away from. The French group got rid of most of its stake in Puma last year to focus on the high-end stuff.Another problem for both rivals is that any counterbid would have to be above the $120 per share on the table, and would probably provoke a response from Arnault. The final purchase price would be even more of a stretch. LVMH has a “balance sheet war chest” of more than $20 billion, according to Deborah Aitken of Bloomberg Intelligence.Of course, a competing bid could be funded partly with shares, but Tiffany might well prefer cash.If Richemont and Kering can’t be enticed, the American company will have to persuade LVMH that it’s worth more without the help of an interloper bidding up the price. With its sales going in the wrong direction that looks difficult. But auction or not, it’s Tiffany’s job to make Arnault pay up.\--With assistance from Chris Hughes.To contact the author of this story: Andrea Felsted at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Investors in Uber Technologies Inc. are bracing themselves for the end of a lockup period on Wednesday that’s expected to flood the market with shares of the ride-hailing giant. Those worries -- following lackluster quarterly results -- sent the company’s stock to an all-time low on Tuesday, after months of downward movement.The lockup period expiry, which will allow early investors to sell stock to a skittish public market, comes on the heels of a rocky earnings report for the company on Monday. Uber’s food-delivery business and bookings growth underperformed investor expectations, overshadowing a pledge by the money-losing company to achieve profitability by 2021.But the stock’s mostly downward trajectory since its much-hyped initial public offering in May has some investors wondering if the deluge of new shares will mark a turning point.“The one thing that is holding back Uber shares is the enormous lockup expiration that starts [Wednesday], and it is tough to get a lot of these long-only investors into the game ahead of such a mass supply hitting the market,” Evercore ISI analyst Benjamin Black said in a phone interview.There’s no consensus on the number of shares that will start trading on Wednesday. RBC Capital Markets analyst Mark Mahaney estimated that roughly 1.7 billion shares will become eligible for sale. Wedbush Securities’ Daniel Ives said he expected 763 million will hit the market. The company had about 1.7 billion shares outstanding as of Sept. 30, according to Bloomberg data.IPO specialist Renaissance Capital estimated that about 1.5 billion shares will be released for trading, which would make the expiration of Uber’s lockup the second-largest ever for a venture capital-backed company, the firm said, behind only Alibaba Group Holding Ltd.’s 1.6 billion shares.Black said it could take the market around 100 days to digest an additional supply of around 1 billion shares, based on current trading volumes.Uber’s earnings on Monday beat estimates on both revenue and loss, and could be encouraging for investors who look most closely at traditional metrics, Black said. Those investors could start taking positions once the market processes the new supply, he added.“It’s just that right now there is a buyers’ strike and the shorts can get pretty aggressive,” Black said.To contact the reporter on this story: Esha Dey in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Brad Olesen at email@example.com, ;Mark Milian at firstname.lastname@example.org, Anne VanderMey, Molly SchuetzFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- The best way to avoid owning a stranded asset is to not have that asset in the first place. Kuwait is considering cutting expansion plans for its oil production, as reported by Bloomberg News. This is apparently due to expectations that mounting concern about climate change will curb demand. Yet there are also more prosaic considerations of cost and competition at play here.State-owned Kuwait Petroleum Corp. had a goal of getting production to 4 million barrels a day by 2020 and 4.75 million a day by 2040. As of now, capacity is pegged by the International Energy Agency at slightly below 3 million barrels a day. And production so far this year, which is subject to ongoing OPEC+ restrictions, has averaged about 2.7 million barrels a day.The 2020 target is obviously redundant regardless of the Greta Thunbergs of this world. OPEC’s own projections imply demand for its crude oil will drop another 1.2 million barrels a day in 2020. A year ago, in its most recent medium-term outlook, OPEC wrote that demand for its oil wouldn’t recover to 2018 levels until the late 2020s. Incidentally, OPEC now pegs demand for its crude oil next year at 29.6 million barrels a day, fully 3.1 million barrels less than what it projected only last November, which is equivalent to all of Kuwait’s output and then some.All this is more a function of rising U.S. supply rather than expectations of imminent peak demand; OPEC doesn’t foresee that happening this side of 2040, at least. Kuwait’s 2020 target was set almost two decades ago, when Pets.com was still a thing but neither fracking nor renewable energy were expected to take off. Delaying it by another 20 years is merely a belated recognition of reality.The new 2040 target is also somewhat redundant, but in a different way. The revision to the 2020 target reflects a global energy business that has become unpredictable across multiple dimensions, encompassing not just climate change, but technological and geopolitical changes too. To predict the world’s energy mix, or one country’s production, with any degree of exactitude 20 years out is is to get it wrong these days.What is important about Kuwait’s new target is the trend. The long-standing position of enormous expansion has given way to caution. Scenarios where oil demand peaks play a critical role in that. More pertinent is the sheer range of outcomes and what they imply for oil demand and prices. Oil has entered a period of greater competition, both between suppliers and with other fuels, meaning the range of pricing outcomes is very wide.Kuwait, like its much larger neighbor Saudi Arabia, is technically a low-cost producer. But its reliance on oil rents to fund its social contract means it actually requires a higher price: north of $50 a barrel, according to estimates from RBC Capital Markets (Saudi Arabia’s are higher still). Regardless of whether global oil demand peaks in the 2020s, ‘30s or whenever, the strategy for both countries boils down to one thing: Keep production costs as low as possible, both to be the last producers standing and to preserve as much rent as possible to ease an economic transition as and when oil demand does peak and decline.One thing we know, even if we don’t have exact numbers, is that the future barrels Kuwait and Saudi Arabia are developing today will be more expensive than those produced in the past (something any investor in any eventual IPO of Saudi Arabian Oil Co. should ponder). There’s a lesson here from the recent experience of the western oil majors. They invested vast sums in new projects in the decade leading up to 2014 on the premise of $100 oil being the new normal. The subsequent crash and realization of structural changes centered on shale and climate change exposed the fallacy of this, and those companies have paid a heavy price in the stock market. Their new mantra — most of them anyway — is to be cautious on spending, prioritizing payouts to shareholders and profits over sheer volume.Think of Kuwait’s new 2040 target in those terms. It sees the world is changing, but getting a handle on what that will mean in 2040 (or even 2030) is essentially impossible, as today’s surprising reality attests. When the path ahead is that dark and prone to pitfalls, it’s better to take incremental steps rather than big strides — or, in this case, set smaller capex budgets and stay flexible. In that sense, the climate for this industry has changed fundamentally already.To contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.