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“EQB has a different mix of single-family housing loans compared to the Big 6 banks in Canada,” he said. “Their duration of loans is much shorter than the other larger banks. EQB has disclosed that 90 per cent of their single-family loans have already been renewed, with most paying a lower rate. The CMHC recently released a report on the housing market indicating that over 1.2 million mortgages will renew in 2025 for the first time in years. This indicates a substantial portion of Canadians will be suffering from ‘sticker shock’ as their 3-5 year mortgages renew at higher rates. We believe a substantial portion of these mortgages belong to the Big 6 banks. Notably, 85 per cent of those were contracted when the Bank of Canada rate was at or below 1.0 per cent.
“Additionally, we believe U.S. investors should take advantage of the mismatch in the currency, which is at a ~15 year low for the Canadian dollar. The average ROE for U.S. banks is in the 11.0-per-cent to 12.0-per-cent range. For U.S. investors, they would be buying a 15-per-cent ROE at a 30-per-cent discount on the multiple when factoring in the currency.”
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