International Royal Bank of Canada vs CBA

Have came across several articles from US investors praising Canadian banks so decided to check out Royal Bank of Canada which is largest bank in Canada against CBA which is the largest and most profitable bank in Australia. I was pleasantly surprised by my findings.

As an investor one of the first places I start is to look at their long term dividend history.

On their website they had dividend history dating back to 2000 (See dividend history). RBC pays quarterly dividends and paid $0.57 dividend in 2000 and paid $3.48 in 2017. That is compounded annual growth of 11.2%. The best part is dividends have never been cut during last 17 years. Not even during GFC. Very impressive record.

CBA paid $1.30 dividend in 2000 and $4.29 in 2017. Growing their dividends at 7.27%. They did cut their dividends during GFC. But within a year it surpassed the previous high.

The market cap of RBC is slightly higher than CBA and dividend payout ratios is less than CBA.

All in all RBC seems to have a better track record than CBA which I always believed was one of the best managed banks around the world.

Canada has several other banks namely Toronto-Dominion, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce. All of which are highly profitable.

Below is chart of RBC vs CBA since 1996 to 2017




Cheers,
Oracle.

 

If CBA are paying more dividends, in theory CBA market cap should be lower than RBC. Market cap includes retained earnings (unpaid dividends), growth assumptions and other things.

 

You have to consider taxes. Canadas franking system is different to australia.

 

Also the property bubble is deflating in Canada rather well, there is much more confidence in bank exposure there. Australia is only starting to balance its property market.

There is no Royal commission into banks there either. All these will create a short term pressure on bank valuations. In long run I believe Australian banks are doing much better considering the larger dividends they pay, there fantastic performance in market that’s half the size of Canadian market and their larger exposure to China.

 

A bit off track. But... from this I googled that Canada's population is around 36 million. Say Australia is around 25 mill. A source that came up says Canada's population is around 0.5% of the world's population. Which means Australia has only around ~0.35%! We are lucky to live here...

I heard that the banking environment in Australia is like Canada's. A few big players. And Air Canada is like Qantas. One big major airline for the country and these companies can learn from each other.

 

Yep. We are definitely lucky!

It’s similar but not. They are more like America’s New Zealand.

 

Sounds like a good analogy. They have a big sibling taking all the attention.