In short: Raised by the Toronto-based host — "Canada's largest bank… up 20 or 25% on the year, trading at all-time highs" — as the Canadian analogue to JPM. Newton answered on the sector rather than the name; no specific view on RY was offered.
Royal Bank was raised by the Toronto-based host as Canada's version of the JPMorgan story — the country's largest bank, up 20–25% on the year and trading at all-time highs.
Newton answered on the sector rather than the name, and his overweight is specifically framed around the US yield curve and Fed policy. Canadian banks face their own rate cycle and a very different mortgage market, so this row records the mention without attributing a view he did not give.
21:48I believe it's up 20 or 25% on the year. Trading at all-time highs. But, what's your view on the financials here? Do they keep going? — I'm overweight the financials. I think they do. Specifically because of what Warsh's stance [as heard: "war chest stance"] and the Fed's stance towards forward guidance has done to the yield curve and starting to steepen out pretty dramatically in the last few weeks.
In short: A top-10 holding he's trimming modestly. Long-term fine, but multiple expansion has done the work and "what that portends is more difficult returns going forward."
Royal Bank is another of his four bank holdings and a top-10 position. The view is identical to BMO's: the fundamentals are fine, but nearly all of the recent return came from investors being willing to pay a higher multiple for the same earnings.
Because that "pulls returns forward," he expects more difficult returns from here — so he is underweight and modestly trimming rather than adding, without any suggestion the business is impaired.
9:41I would say that we're underweight banks and we've been using it at the margin as a source of cash. So our activity in banks in recent quarters has been to trim, albeit modestly trim the banks, and our view on the fundamentals, Amber, has been really pretty consistent here.
In short: Anchor of the "not a bubble / dangerous to bet against" call — and his favourite trivia: Royal Bank's largest shareholder is the other Canadian banks, an incestuous cross-ownership no other banking system has. Raised its buyback on the last call; expanding ROEs, growing dividends, ~40% of the index, ever-more ETF flow, and the biggest proprietary database to point AI at. He does warn the 12–18-month multiple expansion (up ~30% this year) can't be extrapolated.
Asked whether Canadian banks at record highs are a bubble — David Rosenberg says yes — Morrison says no, and explains why shorting them has failed for two decades. Canadian banking is an oligopoly: five players, enormous barriers, and a structural flywheel of buying. The banks buy back their own shares (all three of Royal, BMO and CIBC raised their buybacks on the last round of results), they own each other — Royal Bank's largest shareholder is the other Canadian banks, which is not how other countries' banking systems work — financials are about 40% of the Canadian index, so every index-fund and ETF dollar buys them mechanically, and when you sell a business and park the proceeds at your bank, the bank invests some of it back into itself.
On top of the flywheel: returns on equity are rising, dividends are growing, high interest rates make lending profitable, wealth management gives them predictable fee income, capital markets are in a lucrative window (huge IPOs coming), and AI is likeliest to pay off for big organisations with enormous proprietary databases — which describes a bank exactly. His only caution is arithmetic: after ~30% in a year and a big re-rating on price-to-book, you can't extrapolate the same again over the next 12–18 months.
17:29It's the other bank. — Yeah. Yeah. And the other Canadian banks, right? So when you when you go if you look at other international banks they don't own each other as much as we do here in Canada. — So incestrous. — Yes. So add the buybacks to the equation right that they're doing themselves.
In short: Held 22 years (since 2004) — the "crown multiple" bank. Avoided the acquisition troubles other banks hit; strong core banking/wealth/capital-markets. "Always expensive," owned as a durable core alongside National Bank.
Royal Bank is Canada's largest bank, and Teich has owned it for 22 years — since 2004. It has always carried a premium ("crown") valuation and has always been "expensive," but it avoided the acquisition missteps that tripped up some rivals, and its core banking, wealth-management and capital-markets businesses are all strong. He holds it as a durable core position alongside National Bank, picking two quality banks rather than owning the whole sector.
52:07And we're happy to own it, again we own Royal as well. We've owned Royal for 22 years. And Royal is always expensive.
52:16Yeah. And again, Royal has always had kind of the crown multiple. Mhm.
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