Disclosure: Bullpen receives compensation from VersaBank for research coverage. VersaBank is also an IR client of LodeRock Advisors, an affiliate of Bullpen.
|
|
||||
|
|
||||
|
|
||||
|
|
A quiet end to a quiet week. With Labour Day Monday, we’ll be back in your inbox on Wednesday - enjoy the long weekend! 🍻
WHAT'S ON TAP
HOT OFF THE PRESS
$769M trade surplus is the fifth straight
Canada recorded a fifth straight trade surplus in July, though it narrowed from $4.2B last month to $769M…
… on a $1.6B increase in imports…
… primarily driven by the auto sector, which has been on a steady grind higher after a weak start to the year as production lines retooled in January.
Exports added further pressure, declining nearly $2B on weakness in metals and energy products - which offset big percentage gains in aircraft (up 80%) and canola (up 43%, thanks China)…
… and drove a near-7% sequential drop in exports south of the border.
Non-US exports notched a new record high, rising 7% M/M…
… which could continue, with diversification staying topical each time our neighbourly trade spat gets turned up a notch.
Labour productivity hits six-year high
Labour productivity increased 1% Q/Q, the highest growth rate in six years (when pandemic lockdowns ended)…
… on broad-based improvements at the sector level - with resources, wholesale trade, and manufacturing leading the way.
The boost in productivity kept growth in unit labour costs at bay, which rose 0.6% despite a 1.6% increase in hourly pay…
… pushing labour’s share of business output down 2.5% in conjunction with 3.2% growth in output unit values, driving corporate margin expansion.
ON OUR RADAR
GAINERS & LOSERS
|
|
||||
|
|
||||
|
|
VersaBank (VBNK) ran 7% on its Q3 results, which delivered Y/Y growth of 23% on the top line and 27% in core earnings - with over US$720M of US SRP fundings YTD…
… and the company expecting to hit its US$1B target in calendar 2026. Supported by demand for its real-time SRP functionality, management is calling for US$3B of SRP volumes in fiscal 2027, which should improve total bank efficiency…
… alongside a cyber unit sale, which looks likely within the next twelve months.
All else equal, these initiatives would drive ROE meaningfully higher…
… which investors are pricing in, with the book value multiple expanding to 1.6x.
While executing on such ambitious growth plans will chew through capital, VersaBank has a large capital cushion…
… and several non-equity levers it can pull, as outlined in the full report below:
Was this forwarded to you? Join 10,000+ investors reading The Morning Meeting by clicking the button below.
