Saakshi Mehta

Diversification Driving Growth: Despite the slowest loan growth in decades, Canadian banks delivered nearly 10% revenue growth, with non-interest income (trading and fee-based) now making up 54% of total revenues.

Mixed Core Performance & Cautious Outlook: Capital markets and wealth management were strong, while traditional lending lagged; banks remain cautious on credit risk, increasing provisions for non-impaired loans.

Valuation & Strategy Implications: Robust capital positions support dividends and buybacks, creating rationale for an equal-weight beta exposure such as ZEB. For those with valuation concerns, we suggest covered call strategies like ZWB to smooth returns and limit volatility.

Canada’s latest budget marks a major pivot toward long-term growth, with C$115B in infrastructure spending alongside substantial allocations for defense and housing. Alongside those investments, the Feds are encouraging private sector participation via regulatory streamlining and tax incentives.

Over the past month, the sectoral theme of note has been the rotation out of cyclicals and into defensives. This has been most evident in the performance of Health Care (up over 9% in November) versus Tech (down 4.4%). While we continue to like staying overweight Health Care, we also want to pay tribute to other sectors that show a favourable revenue profile but are still undervalued.