royal bank

Earnings growth at Canada’s big five banks will probably slow slightly in 2013, as rising debt levels prompt consumers to take out fewer loans.

However, business loan demand should stay steady. As well, the banks’ loan losses continue to fall as more borrowers focus on debt repayment....

SNC-LAVALIN GROUP INC., $39.40, Toronto symbol SNC, fell 5% this week in response to the arrest of Pierre Duhaime, the company’s former chief executive officer. The charges relate to possible illegal payments that SNC may have paid to secure a contract to build the new McGill University Health Centre in Montreal. The company and its partners won this deal in April 2010 under a public-private partnership with the Quebec government. It’s unclear if these payments are related to the $56 million U.S. in unusual payments to agents that SNC discovered in March 2012. To put that in context, SNC earned $378.8 million (Canadian), or $2.49 a share, in 2011. This situation prompted Mr. Duhaime to step down as CEO and a director of the company. SNC also fired other executives....

Olympia Financial Group, $39.25, symbol OLY on Toronto (Shares outstanding: 2.5 million; Market cap: $99.1 million; www.olympiatrust.com), conducts most of its business through its wholly owned Olympia Trust Company subsidiary, which started up in September 1995. Rather than take deposits from customers and then make loans, Olympia Trust acts as a trustee and manages self-administered registered plans. It also acts as a registrar and transfer agent for companies listed on the Toronto stock market and administers employee stock purchase plans for corporations. In addition, Olympia Financial provides other services, such as foreign currency exchange. One of its divisions, Olympia Benefits, sells private health-service plans. Right now, Olympia only operates in Alberta, B.C., Saskatchewan and Manitoba. However, it has been granted a license to operate as a non-deposit-taking trust company in Quebec. That will let it expand its registered-plans and foreign-exchange businesses in that province....

ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $20.77 (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of its assets. The fund’s MER is 0.50%. It yields 4.6%.

The fund’s top holdings are CIBC, 7.1%; National Bank, 5.8%; TD Bank, 5.6%; Bank of Montreal, 5.3%; Bonterra Energy, 4.8%; Royal Bank, 4.6%; Telus Corp., 4.6%; Bank of Nova Scotia, 4.3%; BCE Inc., 4.1%; and AG Growth International, 4.0%.

The fund holds 54.4% of its assets in financial stocks. Utilities are next, at 21.2%. The top Canadian finance stocks have sound prospects. However, if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector.

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ISHARES S&P/TSX 60 INDEX FUND $17.71 (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good, low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets.

The index mostly consists of high-quality companies. However, as the fund must ensure that all sectors are represented, it holds a few stocks we wouldn’t include.

The index’s top holdings are Royal Bank, 7.4%; TD Bank, 6.8%; Bank of Nova Scotia, 5.8%; Suncor Energy, 4.5%; Barrick Gold, 3.7%; CN Railway, 3.5%; Bank of Montreal, 3.4%; Potash Corp., 3.3%; Goldcorp, 3.3%; BCE Inc., 3.1%; Canadian Natural Resources, 3.0%; TransCanada Corp., 2.9%; CIBC, 2.8%; Enbridge, 2.8%; Cenovus Energy, 2.4%; and Telus Corp., 1.8%.

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Vanguard Canadian Short-Term Bond Index ETF, $24.96, symbol VSB on New York (Shares outstanding: 1.7 million; Market cap: $42.4 million; www.vanguard.com), mirrors the performance of the Barclays Global Aggregate Canadian Government/Credit 1-5 Year Float Adjusted Bond Index. This index consists of a wide range of investment-grade federal, provincial, municipal and corporate bonds with between one- and five-year terms to maturity. The fund holds 184 bonds with an average term to maturity of 3.0 years. The bonds in the index are 72.9% government and 27.1% corporate. The fund’s MER is 0.15%. The Vanguard Canadian Short-Term Bond Index ETF yields 2.8%. However, this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. But as a result they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, which means the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields....

iShares S&P/TSX Capped Financials Index Fund, $22.71, symbol XFN on Toronto (Shares outstanding: 35.6 million; Market cap: $808.5 million; ca.ishares.com), aims to mirror the performance of the S&P/TSX Capped Financials Index, which is made up of the largest-capitalization financial-sector stocks on the Toronto exchange. The fund currently holds 25 stocks. The weight of any one company is capped at 25% of the index’s market capitalization, regardless of how big the stock is in relation to the index. The fund’s MER is 0.55%. It yields 3.5%. The iShares S&P/TSX Capped Financials Index Fund’s top holdings are Royal Bank at 20.5%; TD Bank, 18.7%; Bank of Nova Scotia, 15.6%; Bank of Montreal, 9.5%; CIBC, 7.8%; Manulife Financial, 5.5%; Sun Life Financial, 3.6%; National Bank, 3.1%; Power Corporation, 2.1%; and Intact Financial, 2.0%....

CANADIAN PACIFIC RAILWAY LTD., $91.80, Toronto symbol CP, rose 4% this week after it reported better-than-expected quarterly earnings. That’s because the company is starting to benefit from a major plan to improve its efficiency with new locomotives, upgraded tracks and software that optimizes train loads and speeds. In the three months ended September 30, 2012, CP’s earnings rose 19.8%, to $224 million, or $1.30 a share. That easily beat the consensus estimate of $1.23. A year earlier, the company earned $187 million, or $1.10 a share. Revenue rose 8.2%, to $1.45 billion from $1.34 billion. The company saw revenue gains from shipping automotive products (up 31.3%), consumer and industrial products (up 23.7%), coal (up 9.5%), intermodal (up 7.4%) and grain (up 2.1%). Revenue from fertilizer shipments fell 19.0%, while forest products revenue declined 3.9%....

Most stock markets have risen lately. But as always, they remain subject to unexpected downturns. Even so, the long-term outlook is for higher stock prices. One way to profit from rising markets is to add exchange traded funds (ETFs) that track major stock indexes to your portfolio. ETF’s trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You must pay brokerage commissions to buy and sell ETFs, but their low management fees still give them a cost advantage over most mutual funds....

AGRIUM INC., $100.74, Toronto symbol AGU, is buying back up to 9.5 million, or 6%, of its 158.0 million outstanding common shares through a Dutch auction process. It will spend a total of $900 million on these repurchases. The company makes fertilizers from natural gas. It then sells them, along with other agricultural and industrial goods, through its more than 1,200 stores in North America, South America and Australia. Under the Dutch auction buyback plan, shareholders who want to sell their Agrium shares must offer them for between $95.00 and $107.00 by October 19, 2012. The final price will be the lowest amount within that range at which Agrium can buy $900 million of its shares. The company will then pay that price for all shares tendered at or below it. If you tender at a higher price, Agrium will return your shares. The transactions are...