Earlier we highlighted buyback activity among the Canadian names had been ramping up, reaching levels not seen since slack came back into the market post-COVID.
This time around the main driver has been the financials sector, in comparison to heightened activity from resources names (energy & mining) in the previous cycle.
Within the financials sector, the big banks have been driving the bus…
… but even the life insurance names have been mopping up shares recently.
For the banks, the decision is partly due to a deceleration in low growth…
… as tariffs have slowed down risk appetite from the private sector…
You’ve seen some more muted loan growth as we go through trade policy uncertainty, which I think once gets settled, you’ll see that pick up.
… and the other main driver has been their capital positions, which sit well above regulatory minimums…
… something both the banks and life insurers have in common.
Regardless though, a ramp up in buybacks comes at the expense of other uses of capital - meaning the group isn’t seeing market returns high enough to forgo repurchases.
For the banks trading relatively cheap versus their long-term average book value multiples, this might not be such a bad thing. For the lifecos… let’s see.
