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Banking on the Banks

Why I “Bank” on the Boring Canadian Banks

Hey everyone, it’s Fabio Campanella here. You already know me as your trusted tax advisor, but did you know that I’m also a registered investment advisor (since 2010)? Yes, that’s right! I can help you not just with your taxes, but also with planning for your financial future. And speaking of future, today I want to talk to you about a gem in the investment landscape—Canadian banks!

You know those financial institutions that have been around for over 200 years and have evolved from simple deposit-taking outfits to diversified financial powerhouses? Yep, those Canadian banks. Here’s why you might want to consider them for the long haul in your investment portfolio.

So why should you consider putting your money in Canadian banks for the long haul? Well, for starters, they’re really profitable. I mean, who doesn’t like profitability, right? Over the years, Canadian banks have consistently outperformed the broader Canadian market in terms of return on equity (ROE). While the rest of the market hovered around a 10% ROE, these banks consistently hit around 14%. In terms of total return, they’ve managed to churn out around 10% per year for the last decade, which is well above the 7-8% annual return of the overall market.

Another reason I’m bullish about Canadian banks is their growth prospects. A lot of folks think that the Canadian economy is all about real estate. But it’s so much more diverse—trade, natural resources, manufacturing, you name it. Banks are deeply integrated into these sectors, offering loans, and facilitating transactions. This means that as the Canadian economy grows, so do the banks. Factors like operating efficiencies through digitization, immigration, and acquisitions are going to fuel this growth further.

Let’s break these down a bit:

  1. Efficiency Gains: As the world is moving towards digital platforms, Canadian banks are investing in tech to improve their operations. Whether it’s more cashless transactions or advanced data analytics to understand customer preferences, these efficiency gains are expected to significantly improve their profit margins over the next decade.
  2. Immigration: More people coming into Canada means more customers for the banks. Canada’s immigration rate is 2x to 3x faster than countries like the U.S., U.K., and Germany. And get this, most immigrants to Canada are economic migrants, meaning they’ll be an excellent customer base for banks, providing new deposits and using various financial services.
  3. Acquisitions: These banks also grow by buying other companies. With low dividend payout ratios and ample capital, they’ve got the flexibility to make these acquisitions that span multiple business sectors—from basic banking to wealth management and even capital markets.

And here’s the kicker: banks that have consistently grown their dividends over the years are usually the ones that have performed the best. Dividend growth is often a direct result of strong earnings growth. So, a bank growing its dividend is a pretty good indicator that its stock price is likely to climb too.

In summary, when you invest in Canadian banks, you’re essentially banking on the growth of an entire country. Strong profitability, multiple growth drivers, and a history of consistent dividend increases make this a bet worth considering. And who better to guide you through this than someone who already knows your financial situation? 😉

So, if this has piqued your interest and you’re thinking about where to best place your investments for the future, let’s chat. I offer a full range of investment advisory services tailored for retirement planning, portfolio allocation, and more. Simply reply to this email or give me a call to set up a consultation. Because managing your taxes is great, but securing your financial future? That’s priceless.

Wishing you all the best in your financial journey!


The information provided in this blog post is for general informational and educational purposes only and is not, and should not be construed as, investment or financial advice. The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, or company. Investments come with risk, and you should consult a qualified financial advisor or other appropriate professionals based on your individual needs and circumstances before making any financial decisions.

This blog does not constitute an offer or solicitation in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Past performance is not indicative of future results, and no representation or warranty, express or implied, is made regarding future performance.

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Are you frus­trated with the level of tax you’re pay­ing? Do you feel like tax ad­vi­sors and fi­nan­cial ad­vi­sors aren’t speak­ing the same lan­guage? Are you of­ten left won­der­ing if you are leav­ing money on the table due to a lack of in­te­grated plan­ning?

Fabio and his team have been help­ing clients plan their tax, re­tire­ment, and es­tate mat­ters since 2002.

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