Canada’s biggest banks have shed almost C$49 billion ($36 billion) in market value in March, making a loser of the country’s benchmark stock index while US equities are rising.
(Bloomberg) — Canada’s biggest banks have shed almost C$49 billion ($36 billion) in market value in March, making a loser of the country’s benchmark stock index while US equities are rising.
The S&P/TSX Composite Index declined 0.6% in March thanks to financials, its largest sector weighting. Canada’s biggest lenders are being buffeted by turmoil in the banking sector thanks to large holdings in US regional banks, including Toronto-Dominion Bank’s stake in Charles Schwab.
“Unrealized losses on investment portfolios have become topical for Canadian banks in light of recent US events — rightly so, as this issue contributed to the biggest US bank failure since 2008,” Desjardins analysts led by Doug Young wrote in a note on March 27. He said unrealized losses on securities and commercial real estate risk could potentially reduce Canada’s Big 6 banks’ currently “comfortable” CET1 risk ratios by an average of 65 basis points in a “worst-case scenario.”
TD notched its worst month since June 2022 and has shed C$18 billion in market value during the period.
The S&P/TSX Banks Index dropped 6.8% in March and the subindex has shaved 281 points off the broader Composite index, which is down 121 points this month.
As a result, stocks in Toronto have underperformed the S&P 500 Index as the US benchmark enjoyed a 3.5% gain on the back of its largest sector, information technology. The tech-heavy Nasdaq 100 posted its best quarter since June 2020.
Financials are the third-largest sector by weighting in the S&P 500, at roughly 13%, compared to a 30% weighting on the S&P/TSX Composite.
(Updates with closing share prices, index moves throughout.)
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