RE:RE:Valuation CheckI understand your argument but at a time of crisis, P/E and ROE dont mean much for financials because of their inherent leverage and therefore earnings swing. EQB has a higher exposure of commercial loans than HCG which will translate to higher provisions and hurt EQB's earnings going forward. P/B is a more relevant metric now.
I do agree about the dividend point though, assuming EQB is not going to cut dividends. But the effect is more on the short selling side. Short sellers tend to be more careful with dividend paying companies because they have to shell out the cash when dividend payments are made. HCG has not been paying dividends because they prefer buying back (which makes sense) but now OSFI is asking firms not to do buy back so their hands are tied.
I own both as well but with the current differences in valuation, HCG seems to have better risk-adjsuted returns IMO.
Northforce13 wrote: Well, I've been noticing that too, this might have something to do with it;
* EQB's earnings yield based off of the past quarters earnings is still higher than HCG, even at these prices, EQB is selling at a lower P/E
* EQB's return on equity is higher than HCG, by a significant amount
* EQB pays a dividend, while HCG would return capital through buybacks, which it cannot currently do
So EQB sells at a lower P/E, has higher ROE and pays a dividend.
There might be something of a decoupling between the two, as EQB comes to be regarded as a higher quality bank (which I would agree with), with more of a resemblance to the big six than tp HCG. People looking to do some buying are probably looking at both and feeling EQB looks better.
I own both, having bought a mountain of EQB and a fairly decent position in HCG a couple weeks back as posted on both boards.
HCG does have much more capital than EQB, that's what HCG does have going for it.