Mar 31, 2023
Big 6 Canadian banks make TSX a March loser while U.S. indexes jump
Canadian banks unlikely to have a deposit run: Brompton
Canada’s biggest banks have shed almost $49 billion (US$36 billion) in market value in March, making a loser of the country’s benchmark stock index while U.S. equities are rising.
The S&P/TSX Composite Index declined 0.6 per cent in March thanks to financials, its largest sector weighting. Canada’s biggest lenders are being buffeted by turmoil in the banking sector thanks to large holdings in U.S. regional banks, including Toronto-Dominion Bank’s stake in Charles Schwab.
“Unrealized losses on investment portfolios have become topical for Canadian banks in light of recent U.S. events — rightly so, as this issue contributed to the biggest U.S. bank failure since 2008,” Desjardins analysts led by Doug Young wrote in a note on March 27. He said unrealized losses on securities and commercial real estate risk could potentially reduce Canada’s Big 6 banks’ currently “comfortable” CET1 risk ratios by an average of 65 basis points in a “worst-case scenario.”
TD notched its worst month since June 2022 and has shed $18 billion in market value during the period.
The S&P/TSX Banks Index dropped 6.8 per cent in March and the subindex has shaved 281 points off the broader Composite index, which is down 121 points this month.
As a result, stocks in Toronto have underperformed the S&P 500 Index as the US benchmark enjoyed a 3.5 per cent gain on the back of its largest sector, information technology. The tech-heavy Nasdaq 100 posted its best quarter since June 2020.
Financials are the third-largest sector by weighting in the S&P 500, at roughly 13 per cent, compared to a 30 per cent weighting on the S&P/TSX Composite.