Slow and Steady can still win the Race
16 September 2008Having worked at Canada’s biggest bank for 15 years, it’s fair to say that I was pretty sensitive while employed there to criticism of customers and even friends that “the Canadian Banks literally take no risk and aren’t nearly as aggressive (code for smart) as their U.S. counterparts”.
Well today I think it’s easy to see that the shareholders of Canadian Banks have been well served by the slow and steady strategies of their Boards and CEOs - no one “bet the bank”. The same cannot be said of the financial services companies south of the border - the carnage is everywhere.
Just look at the drop in share price from a year ago of these household names:
BofA -50%
Citigroup -68%
Goldman Sachs -45%
Merrill Lynch - 78%
Compare these declines to the members of Canadian oligarchy:
BMO -28%
BNS - 13%
CIBC -40%
RBC -16%
TD -21%
Now this isn’t to say that the Canadian Banks haven’t run into their own sharp objects; as we know at least 2 of them have over the past few years on fairly consistent basis. But even with some mis-steps, their collective strategy to make selective acquisitions at home and abroad and to invest and support their domestic retail banking franchise looks to be a winner - not exciting but a winner. It’s not often Canadian Bank’s can feel superior to their U.S. colleagues but it’s clear today slow and steady does wins the race.
FMU
One Response to “Slow and Steady can still win the Race”
September 16th, 2008 at 9:39 pm
Well, Canadian is similar yet so different, in banking, gas stations, and technology
I generally agree with you on the slow & steady side such as TD (not CIBC). However, they should be aggressive (such as M&A) when they should be (such as TD Bank North, Ameritrade, etc…). Look at BAC (we own BAC, big losses since Oct 2007, but we just kept buying more, partially dividends play too), they kept buying Countrywide or MER even in tough times, for LONG TERM.
On our side, nobody does anything, and sadly this is how Canadian economy is - gentle, slow, do nothing as we generally have no competitions (especially in banking), that is part of the reason they didn’t suffer as bad as US counterparts. Unfortunately, they won’t succeed as well as them either
Berkshire is a perfect example, slow, steady, yet decisive at critical times to buy, and history has proved it works!