RE:RE:Be Careful OSFI have allowed Canadian banks to use lower risk weights than US peers, due to the mix of CdN housing and it’s perceived safety. This allows the CdN banks to run with more leverage . My point was if you use US risk weights to determine CET1, the leverage in Canada is north of 20 to 1. Just look at how the US segments of the big 6 are capitalized .
Anyways, the most exposure pure play on CDN housing is CIBC, which also happens to have close to lowest multiple and highest yield.
If house prices do fall even marginally in Canada, capital will be raised by CDN banks , forced by the regulator and dilute common shareholders. This doesn’t even factor in corporate loans (at record high as recession begins).
If things were as peachy as you suggest, the stock wouldn’t be yielding 7.5 percent and CHMC wouldn’t have had to Hoover up all those mortgages to free up capital.
But anyways, good luck with your bank investing .