Last week, the Persian Gulf nation of Dubai asked creditors of state-owned conglomerate Dubai World for a stay in payments on its roughly $60 billion U.S. of debt. The news raised fears that the country could eventually default on its debt, and caused a drop in world stock markets. Asian and U.S. banks were particularly hard hit. Like their international counterparts, Canadian bank stocks initially declined when the story of Dubai’s debt problems broke. But they quickly recovered, mainly because investors realized that the big-five Canadian banks are much better insulated from the problems in Dubai than many of their Asian, European and U.S. counterparts.
Canada’s major bank stocks are good at spotting risky investments — and staying out
All five of Canada’s big bank stocks have long demonstrated an ability to identify risky investments like the situation in Dubai. That’s partly why we continue to recommend them in our investment services and newsletters, including our flagship publication, The Successful Investor.
What’s more, Canada’s bank stocks have rebounded strongly since stock markets hit their March 2009 lows. In part, that’s because their more conservative lending approaches helped them weather the credit crisis and profit during the recession. [ofie_ad]
Keep your investment goals in mind when buying Canadian bank stocks
Each of the big five banks have different objectives, so they’re not all suitable for every investor’s portfolio. Bank of Nova Scotia, for example, has been expanding its international operations (though not in Dubai), lately, so it stands to profit from rising prosperity in developing countries.
Bank of Montreal, meanwhile, has been taking advantage of the recession to add to its presence in the U.S. Last week, the bank announced that it is buying the North American Diners Club credit-card franchise from U.S.-based Citigroup Inc. The bank did not reveal the price, but it probably got a bargain thanks to current weak market conditions for sales of this kind of asset. The deal should close early next year. We’ll continue to monitor the impact of the Dubai situation on world stock markets and update our views in our newsletters and hotlines. To get our latest analysis of Canada’s big-five banks, be sure to consult The Successful Investor. Click here to learn how you can get one month free when you subscribe today.
