INDUSTRY | COMMENT
RBC Dominion Securities Inc.
Andre-Philippe Hardy, CFA (Analyst)
(416) 842-4124; ap.hardy@rbccm.com
Dave Mun, CFA (Associate)
(416) 842-5638; dave.mun@rbccm.com
OCTOBER 13, 2008
RBC Canadian Financial Services Beacon
Canadian bank shares could be due for a
short-term rally
Event
Canadian bank shares could be due for a rally
We believe that the recent decline in Canadian bank shares (-18% in the
last seven trading days) might be overdone and there could be a
short-term positive move.
• We think that the European and U.S. Governments understand the
urgency in stabilizing their banking systems, and we believe there is a
good chance they may succeed in the battle against the cost and availability
of liquidity (which is currently frozen). If we are correct, this would be
positive for Canadian bank shares.
• We think that if Governments do figure out how to stabilize the banking
system's ability to fund itself in short-term markets (some Governments are
starting to guarantee deposits and term funding), fears of short-term
systemic risk should decline, and the pressure on near-term costs of funds in
wholesale markets would also decline.
Sustainability of potential rally would be difficult
We continue to believe that the core businesses of Canadian banks will
face deterioration in growth and profitability, which would put a cap on
the magnitude and duration of a rally. We expect loan growth to decline,
wealth management revenues to decline and loan losses to rise. Furthermore,
the outlook for trading revenues is highly uncertain going into Q4/08 given
the volatility experienced in many asset classes.
• In that kind of environment, we do not believe that today's median
price-to-book multiple of 1.6x is particularly cheap given that that is where
banks traded in the early 2000s when Canadian banks last dealt with rising
loan losses, weak equity markets and slowing loan growth. We believe that,
based on normalized profitability, 1.6x book value is an attractive multiple,
but leading indicators in the following areas would need to turn more
positive before banks can sustainably rally: credit market health, funding
markets health, equity markets, housing markets, and unemployment.
Priced as of prior trading day's market close, EST (unless otherwise noted).
All values in CAD unless otherwise noted.
For Required Disclosures, please see Page 6.
October 13, 2008
RBC Canadian Financial Services Beacon
Canadian bank shares could be due for a short-term rally
We believe that the recent decline in Canadian bank shares (-18% in the last seven trading days) might be overdone and there
could be a short-term positive move. (Exhibit 1)
•
We think that the European and U.S. Governments understand the urgency in stabilizing their banking systems, and we
believe there is a good chance they may succeed in the battle against the cost and availability of liquidity (which is currently
frozen). (See Exhibits 2 and 3.) If we are correct, this would be positive for Canadian bank shares.
•
Some of the many actions undertaken by Governments (such as the Emergency Economic Stabilization Act, the Troubled
Asset Relief Program, deposit guarantees, guarantees on inter-bank lending) have not been enough to unclog important parts
of the banking system – particularly European inter-bank lending – and actions by European Governments have been
criticized by some as disjointed.
•
However, the fact that Governments are taking action to help stabilize liquidity means, in our mind, that: (1) they understand
the need and urgency to act; and (2) they are probably willing to do as much as they can to stabilize banks’ access to shortterm liquidity and its cost. As an example of Governments’ potential willingness to thaw the frozen liquidity markets, the
Wall Street Journal is suggesting that the U.S. Government is considering backing bank deposits. Capital and solvency issues
will still need to be addressed (which is likely to be a negative for shareholders in those banks), but we think liquidity is
probably going to be the area where Governments are most successful in stabilizing the banking system.
•
The costs of stabilizing the banking system in the short term by addressing liquidity issues might ultimately prove to be high
for the Governments, but they must also consider the impact of a banking system failure on their economies, which would be
quite negative in our view.
•
We think that if Governments do figure out how to stabilize the banking system’s ability to fund itself in short-term markets,
fears of short-term systemic risk should decline and the pressure on near-term costs of funds in wholesale markets would also
decline. We believe there is a good chance of that scenario unfolding, which would have positive implications for Canadian
bank shares since they access wholesale funding markets outside of Canada and are participants in global derivatives markets
(and would therefore benefit from a systematic decline in bank counterparty risk).
Exhibit 1: Bank stocks down 18% since October 1
10-Oct
01-Oct
% Change
BMO
$ 37.40
$ 45.68
(18.1)%
BNS
39.98
48.70
(17.9)%
CM
49.10
60.00
(18.2)%
NA
42.25
49.70
(15.0)%
RY
41.00
50.90
(19.4)%
TD
52.14
62.70
Median
(16.8)%
(17.6)%
Source: Thomson One, RBC Capital Markets Research
Exhibit 2: Pressure on global banks’ funding costs at extreme levels
US 3-mo LIBOR minus OIS Swap (%)
%
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
31-Jan-07
30-Apr-07
31-Jul-07
31-Oct-07
31-Jan-08
30-Apr-08
31-Jul-08
2
October 13, 2008
RBC Canadian Financial Services Beacon
Source: Bloomberg, RBC Capital Markets Research
Exhibit 3: Pressure on Canadian short-term BA spreads continues but not as high as global banks
US 3-mo LIBOR spread versus Canada 3-mo BA spread
%
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
30-Sep-06
30-Dec-06
30-Mar-07
30-Jun-07
30-Sep-07
30-Dec-07
30-Mar-08
30-Jun-08
30-Sep-08
-0.5
US 3M LIBOR spread over Treasuries
Canada 3M BA spread over Treasuries
Source: Bloomberg, RBC Capital Markets Research
Sustainability of potential rally would be difficult
We continue to believe that the core businesses of Canadian banks will face deterioration in growth and profitability, which
would put a cap on the magnitude and duration of a rally. We expect loan growth to decline, wealth management revenues to
decline and loan losses to rise. Furthermore, the outlook for trading revenues is highly uncertain going into Q4/08 given the volatility
experienced in many asset classes.
•
In that kind of environment, we do not believe that today’s median price-to-book multiple of 1.6x is particularly cheap given
that that is where banks traded in the early 2000s when Canadian banks last dealt with rising loan losses, weak equity markets
and slowing loan growth. We believe that, based on normalized profitability, 1.6x book value is an attractive multiple, but
leading indicators in the following areas would need to turn more positive before banks can sustainably rally: credit market
health, funding markets health, equity markets, housing markets, and unemployment.
•
For more detail on our outlook on profitability for Canadian banks, please see our industry note, “Canadian Banks and
Insurers: Lowering estimates and target prices to reflect tough macro environment” published on October 7, 2008. Since
then:
o
Positive employment figures for September were released, with Canadian employment recording an unexpected rise
of 107,000 jobs (versus 10,000 expected), which was relatively broad-based across sectors. About 90% of the
increase was due to a rise in part-time employment, which more than offset the large labour decline in July.
Unemployment remained steady at 6.1%.
o
The inaugural release of a Canadian Senior Loan Officer Survey of business lending practices showed that Canadian
banks are tightening lending conditions the most since the data was first gathered in 1999. The report indicates that a
large portion of respondents reported tightening for all types of borrowers: small business, commercial and
corporate. Tightening lending standards are normally associated with rising loan losses and slowing loan growth.
(Exhibit 4).
o
Our economists have recently revised their projections down for the Canadian economy. They are now looking for
GDP growth of 1.5% in 2009 versus 3.0% before and they are calling for an unemployment rate of 6.8% at the end
of 2009 versus their prior estimate of 6.5% and the current level of 6.1%.
3
October 13, 2008
RBC Canadian Financial Services Beacon
Exhibit 4: Senior Loan Officer Surveys showing credit conditions tightening more than during 2001-2002 economic slowdown
Senior Loan Officer Surveys vs. Business & Gov't PCL
(Annual Since 1990)
Correlation Coefficient: 0.51 *
80%
3.0%
2.5%
60%
2.0%
40%
1.5%
20%
1.0%
0%
0.5%
-20%
0.0%
-0.5%
-40%
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
US Senior Loan Officer: Tightening Standards For C&I Loans (Small Businesses) (%, Adv4Q) (LS)
Canada Senior Loan Officer: Tightening Lending Conditions (%, Adv4Q) (LS)
Canadian banks: Business & Gov't loan losses (RS)
*Correlation between US survey and Business & Government loan losses
Source: Bank of Canada, Federal Reserve, RBC Capital Markets Research
•
The other potential impediments to a sustainable rally in bank shares are related to potential unintended consequences of the
various Government actions. We do not profess to have the answers to the potential issues (nor do we think we have
necessarily identified all of the potential issues) – our point is that the news flow related to the impact of Government
initiatives will not be all positive. For example:
o
What if Governments guarantee bank deposits but not money market funds? Does that cause outflows from money
market funds into deposits and, if so, how much does that impact commercial paper markets and then, by extension,
corporate borrowing costs? Does it cause outflows out of equity mutual funds if retail investors would rather have a
guaranteed return rather than remain exposed to continued volatility in equity markets? If so, what impact does that
have on equity markets and the profitability of wealth management businesses?
o
Also, let’s assume for a moment that many Governments around the world nationalize their banks and provide
guarantees on their borrowings. Who would want to borrow from banks without Government guarantees? As well
capitalized as Canadian banks are relative to their worldwide peers, we would suspect most would take UK or US
Government paper over Canadian bank paper in that instance, essentially shutting them out of wholesale markets. In
our view, other Governments’ actions might force the Canadian Government to do more than it has to in order to
help banks, but if it does so with a lag, issues may arise that could lead to volatility in share prices.
4
October 13, 2008
RBC Canadian Financial Services Beacon
Companies Mentioned
Bank of Montreal (TSX: BMO, $32.49, Underperform, Average Risk)
Bank of Nova Scotia (Scotiabank) (TSX: BNS, $34.44, Underperform, Average Risk)
CIBC (TSX: CM, $42.85, Sector Perform, Average Risk)
National Bank of Canada (TSX: NA, $42.25, Sector Perform, Average Risk)
Royal Bank of Canada (TSX: RY, $36.10)
TD Bank (TSX: TD, $44.45, Sector Perform, Average Risk)
5
October 13, 2008
RBC Canadian Financial Services Beacon
Required Disclosures
Explanation of RBC Capital Markets Rating System
An analyst's 'sector' is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assigned to
a particular stock represents solely the analyst's view of how that stock will perform over the next 12 months relative to the analyst's
sector average.
Ratings
Top Pick (TP): Represents best in Outperform category; analyst's best ideas; expected to significantly outperform the sector over 12
months; provides best risk-reward ratio; approximately 10% of analyst's recommendations.
Outperform (O): Expected to materially outperform sector average over 12 months.
Sector Perform (SP): Returns expected to be in line with sector average over 12 months.
Underperform (U): Returns expected to be materially below sector average over 12 months.
Risk Qualifiers (any of the following criteria may be present):
Average Risk (Avg): Volatility and risk expected to be comparable to sector; average revenue and earnings predictability; no
significant cash flow/financing concerns over coming 12-24 months; fairly liquid.
Above Average Risk (AA): Volatility and risk expected to be above sector; below average revenue and earnings predictability; may
not be suitable for a significant class of individual equity investors; may have negative cash flow; low market cap or float.
Speculative (Spec): Risk consistent with venture capital; low public float; potential balance sheet concerns; risk of being delisted.
Distribution of Ratings, Firmwide
For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories - Buy,
Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Top Pick/Outperform,
Sector Perform and Underperform most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same
because our ratings are determined on a relative basis (as described above).
Distribution of Ratings/IB Services
RBC Capital Markets
Investment Banking
Serv./Past 12 Mos.
Rating
BUY[TP/O]
HOLD[SP]
SELL[U]
Count
Percent
Count
Percent
549
542
90
46.48
45.89
7.62
166
118
18
30.24
21.77
20.00
Rating and Price Target History for: Bank of Montreal as of 10-10-2008 (in CAD)
10/20/05
SP:59
11/30/05
SP:63
02/07/06
SP:71
03/03/06
UP:67
05/25/06
UP:64
08/23/06
UP:67
11/21/06
UP:73
11/29/06
UP:70
01/22/07
D:NR:NA
04/30/07
I:UP:70
05/24/07
UP:71
75
60
45
30
Q3
Q1
Q2
Q3
2006
08/01/07
UP:69
Q1
Q2
Q3
Q1
2007
11/13/07
UP:66
01/24/08
UP:58
02/19/08
UP:54
03/05/08
UP:49
Q2
Q3
15
2008
03/11/08
UP:43
03/27/08
UP:44
10/07/08
UP:42
Legend:
TP: Top Pick; O: Outperform; SP: Sector Perform; U: Underperform; I: Initiation of Research Coverage; D: Discontinuation of Research Coverage; NR: Not Rated;
NA: Not Available; RL: Recommended List - RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to date a security was
removed from a recommended list.
Created by BlueMatrix
6
October 13, 2008
RBC Canadian Financial Services Beacon
Rating and Price Target History for: Canadian Imperial Bank of Commerce as of 10-10-2008 (in CAD)
12/02/05
UP:76
02/07/06
UP:81
03/03/06
SP:84
03/14/06
SP:86
06/02/06
SP:85
09/01/06
SP:87
11/21/06
SP:94
12/08/06
OP:105
01/22/07
D:NR:NA
04/30/07
I:TP:114
06/04/07
OP:114
120
100
80
60
40
Q3
Q1
Q2
Q3
2006
08/01/07
OP:108
Q1
Q2
Q3
2007
11/13/07
SP:105
12/07/07
SP:95
01/24/08
SP:73
03/11/08
SP:65
Q1
Q2
Q3
20
2008
04/28/08
SP:69
05/30/08
SP:67
06/03/08
UP:64
06/25/08
UP:62
09/29/08
SP:65
10/07/08
SP:60
Legend:
TP: Top Pick; O: Outperform; SP: Sector Perform; U: Underperform; I: Initiation of Research Coverage; D: Discontinuation of Research Coverage; NR: Not Rated;
NA: Not Available; RL: Recommended List - RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to date a security was
removed from a recommended list.
Created by BlueMatrix
Rating and Price Target History for: National Bank of Canada as of 10-10-2008 (in CAD)
12/09/05
OP:65
02/07/06
OP:71
03/07/06
SP:66
05/26/06
OP:68
09/01/06
OP:67
11/21/06
OP:72
01/22/07
D:NR:NA
04/30/07
I:UP:65
08/01/07
UP:64
08/31/07
UP:60
11/13/07
UP:59
72
64
56
48
40
Q3
Q1
Q2
Q3
2006
12/11/07
SP:59
Q1
Q2
Q3
Q1
2007
01/24/08
SP:55
02/27/08
UP:51
03/11/08
UP:43
03/27/08
UP:45
Q2
Q3
32
2008
05/14/08
UP:47
05/30/08
UP:48
06/03/08
UP:52
08/29/08
UP:53
09/02/08
SP:53
10/07/08
SP:50
Legend:
TP: Top Pick; O: Outperform; SP: Sector Perform; U: Underperform; I: Initiation of Research Coverage; D: Discontinuation of Research Coverage; NR: Not Rated;
NA: Not Available; RL: Recommended List - RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to date a security was
removed from a recommended list.
Created by BlueMatrix
7
October 13, 2008
RBC Canadian Financial Services Beacon
Rating and Price Target History for: TD Bank Financial Group as of 10-10-2008 (in CAD)
11/24/05
OP:70
02/07/06
OP:72
05/26/06
OP:70
08/25/06
OP:75
11/21/06
OP:84
01/03/07
TP:84
01/22/07
D:NR:NA
04/30/07
I:OP:78
05/25/07
OP:82
08/01/07
OP:81
08/24/07
OP:83
80
72
64
56
48
Q3
Q1
Q2
Q3
2006
10/03/07
OP:82
Q1
Q2
Q3
Q1
2007
01/24/08
OP:76
03/11/08
OP:69
06/03/08
SP:69
Q2
Q3
40
2008
10/07/08
SP:65
Legend:
TP: Top Pick; O: Outperform; SP: Sector Perform; U: Underperform; I: Initiation of Research Coverage; D: Discontinuation of Research Coverage; NR: Not Rated;
NA: Not Available; RL: Recommended List - RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to date a security was
removed from a recommended list.
Created by BlueMatrix
Rating and Price Target History for: The Bank of Nova Scotia as of 10-10-2008 (in CAD)
10/20/05
SP:46.5
11/30/05
SP:48
12/06/05
SP:49
02/07/06
SP:51
05/30/06
SP:49
11/21/06
SP:53
01/22/07
D:NR:NA
04/30/07
I:SP:57
08/01/07
SP:54
08/29/07
SP:55
11/13/07
SP:54
60
55
50
45
40
35
Q3
Q1
Q2
Q3
2006
01/24/08
SP:50
Q1
Q2
2007
03/05/08
SP:49
03/11/08
SP:48
04/28/08
UP:46
06/03/08
SP:49
Q3
Q1
Q2
Q3
30
2008
09/02/08
UP:49
10/07/08
UP:46
Legend:
TP: Top Pick; O: Outperform; SP: Sector Perform; U: Underperform; I: Initiation of Research Coverage; D: Discontinuation of Research Coverage; NR: Not Rated;
NA: Not Available; RL: Recommended List - RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to date a security was
removed from a recommended list.
Created by BlueMatrix
References to a Recommended List in the recommendation history chart may include one or more recommended lists or model
portfolios maintained by a business unit of the Wealth Management Division of RBC Capital Markets Corporation. These
Recommended Lists include the Prime Opportunity List (RL 3), the Private Client Prime Portfolio (RL 4), the Prime Income List (RL
6), the Guided Portfolio: Large Cap (RL 7), and the Guided Portfolio: Dividend Growth (RL 8). The abbreviation 'RL On' means the
date a security was placed on a Recommended List. The abbreviation 'RL Off' means the date a security was removed from a
Recommended List.
Analyst Certification
All of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all of the
subject securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly or
indirectly, related to the specific recommendations or views expressed by the responsible analyst(s) in this report.
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RBC Capital Markets endeavours to make all reasonable efforts to provide research simultaneously to all eligible clients, having
regard to local time zones in overseas jurisdictions. RBC Capital Markets' research is posted to our proprietary websites to ensure
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contact your investment advisor or institutional salesperson for more information regarding RBC Capital Markets research.
8
October 13, 2008
RBC Canadian Financial Services Beacon
RBC Capital Markets also provides eligible clients with access to a database which may contain Short-Term trading calls on certain of
the subject companies for which it currently provides equity research coverage. The database may be accessed via the following
hyperlink https://www2.rbccm.com/cmonline/index.html. The information regarding Short-Term trading calls accessible through the
database does not constitute a research report. These Short-Term trading calls are not formal ratings and reflect the research analyst's
views with respect to market and trading events in the coming days or weeks and, as such, may differ from the price targets and
recommendations in our published research reports reflecting the research analyst's views of the longer-term (one year) prospects of
the subject company. Thus, it is possible that a subject company's common equity that is considered a long-term 'sector perform' or
even an 'underperform' might be a Short-Term buying opportunity as a result of temporary selling pressure in the market; conversely,
a subject company's common equity rated a long-term 'outperform' could be considered susceptible to a Short-Term downward price
correction.
Conflicts Disclosures
RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request. To
access our current policy, clients should refer to
http://www.rbccm.com/cm/file/0,,63022,00.pdf
or send a request to RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower,
Toronto, Ontario M5J 2W7. We reserve the right to amend or supplement this policy at any time.
Important Disclosures
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including total
revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated by
investment banking activities of the member companies of RBC Capital Markets and its affiliates.
A member company of RBC Capital Markets or one of its affiliates managed or co-managed a public offering of securities for
Bank of Montreal in the past 12 months.
A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services
from Bank of Montreal in the past 12 months.
RBC Dominion Securities Inc. makes a market in the securities of Bank of Montreal and may act as principal with regard to
sales or purchases of this security.
Royal Bank of Canada, together with its affiliates, beneficially owns 1 percent or more of a class of common equity securities
of Bank of Montreal.
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from Bank of Montreal during the past 12 months. During this time, a member company of RBC
Capital Markets or one of its affiliates provided non-investment banking securities-related services to Bank of Montreal.
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from Bank of Montreal during the past 12 months. During this time, a member company of RBC
Capital Markets or one of its affiliates provided non-securities services to Bank of Montreal.
RBC Capital Markets is currently providing Bank of Montreal with non-investment banking securities-related services.
RBC Capital Markets has provided Bank of Montreal with investment banking services in the past 12 months.
RBC Capital Markets has provided Bank of Montreal with non-investment banking securities-related services in the past 12
months.
RBC Capital Markets has provided Bank of Montreal with non-securities services in the past 12 months.
A member company of RBC Capital Markets or one of its affiliates managed or co-managed a public offering of securities for
Canadian Imperial Bank of Commerce in the past 12 months.
A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services
from Canadian Imperial Bank of Commerce in the past 12 months.
RBC Dominion Securities Inc. makes a market in the securities of Canadian Imperial Bank of Commerce and may act as
principal with regard to sales or purchases of this security.
Royal Bank of Canada, together with its affiliates, beneficially owns 1 percent or more of a class of common equity securities
of Canadian Imperial Bank of Commerce.
9
October 13, 2008
RBC Canadian Financial Services Beacon
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from Canadian Imperial Bank of Commerce during the past 12 months. During this time, a
member company of RBC Capital Markets or one of its affiliates provided non-investment banking securities-related services
to Canadian Imperial Bank of Commerce.
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from Canadian Imperial Bank of Commerce during the past 12 months. During this time, a
member company of RBC Capital Markets or one of its affiliates provided non-securities services to Canadian Imperial Bank
of Commerce.
RBC Capital Markets has provided Canadian Imperial Bank of Commerce with investment banking services in the past 12
months.
RBC Capital Markets has provided Canadian Imperial Bank of Commerce with non-investment banking securities-related
services in the past 12 months.
RBC Capital Markets has provided Canadian Imperial Bank of Commerce with non-securities services in the past 12 months.
A member company of RBC Capital Markets or one of its affiliates managed or co-managed a public offering of securities for
National Bank of Canada in the past 12 months.
A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services
from National Bank of Canada in the past 12 months.
RBC Dominion Securities Inc. makes a market in the securities of National Bank of Canada and may act as principal with
regard to sales or purchases of this security.
Royal Bank of Canada, together with its affiliates, beneficially owns 1 percent or more of a class of common equity securities
of National Bank of Canada.
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from National Bank of Canada during the past 12 months. During this time, a member company of
RBC Capital Markets or one of its affiliates provided non-investment banking securities-related services to National Bank of
Canada.
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from National Bank of Canada during the past 12 months. During this time, a member company of
RBC Capital Markets or one of its affiliates provided non-securities services to National Bank of Canada.
RBC Capital Markets has provided National Bank of Canada with investment banking services in the past 12 months.
RBC Capital Markets has provided National Bank of Canada with non-investment banking securities-related services in the
past 12 months.
RBC Capital Markets has provided National Bank of Canada with non-securities services in the past 12 months.
A member company of RBC Capital Markets or one of its affiliates managed or co-managed a public offering of securities for
TD Bank Financial Group in the past 12 months.
A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services
from TD Bank Financial Group in the past 12 months.
RBC Dominion Securities Inc. makes a market in the securities of TD Bank Financial Group and may act as principal with
regard to sales or purchases of this security.
Royal Bank of Canada, together with its affiliates, beneficially owns 1 percent or more of a class of common equity securities
of TD Bank Financial Group.
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from TD Bank Financial Group during the past 12 months. During this time, a member company
of RBC Capital Markets or one of its affiliates provided non-investment banking securities-related services to TD Bank
Financial Group.
10
October 13, 2008
RBC Canadian Financial Services Beacon
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from TD Bank Financial Group during the past 12 months. During this time, a member company
of RBC Capital Markets or one of its affiliates provided non-securities services to TD Bank Financial Group.
RBC Capital Markets is currently providing TD Bank Financial Group with non-investment banking securities-related services.
RBC Capital Markets is currently providing TD Bank Financial Group with non-securities services.
RBC Capital Markets has provided TD Bank Financial Group with investment banking services in the past 12 months.
RBC Capital Markets has provided TD Bank Financial Group with non-investment banking securities-related services in the
past 12 months.
RBC Capital Markets has provided TD Bank Financial Group with non-securities services in the past 12 months.
A member company of RBC Capital Markets or one of its affiliates managed or co-managed a public offering of securities for
The Bank of Nova Scotia in the past 12 months.
A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services
from The Bank of Nova Scotia in the past 12 months.
RBC Dominion Securities Inc. makes a market in the securities of The Bank of Nova Scotia and may act as principal with
regard to sales or purchases of this security.
Royal Bank of Canada, together with its affiliates, beneficially owns 1 percent or more of a class of common equity securities
of The Bank of Nova Scotia.
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from The Bank of Nova Scotia during the past 12 months. During this time, a member company of
RBC Capital Markets or one of its affiliates provided non-investment banking securities-related services to The Bank of Nova
Scotia.
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from The Bank of Nova Scotia during the past 12 months. During this time, a member company of
RBC Capital Markets or one of its affiliates provided non-securities services to The Bank of Nova Scotia.
RBC Capital Markets has provided The Bank of Nova Scotia with investment banking services in the past 12 months.
RBC Capital Markets has provided The Bank of Nova Scotia with non-investment banking securities-related services in the
past 12 months.
RBC Capital Markets has provided The Bank of Nova Scotia with non-securities services in the past 12 months.
The author is employed by RBC Dominion Securities Inc., a securities broker-dealer with principal offices located in Toronto,
Canada.
Additional Disclosures
RBC Capital Markets is the business name used by certain subsidiaries of Royal Bank of Canada, including RBC Dominion Securities Inc., RBC Capital Markets
Corporation, Royal Bank of Canada Europe Limited and Royal Bank of Canada - Sydney Branch. The information contained in this report has been compiled by RBC
Capital Markets from sources believed to be reliable, but no representation or warranty, express or implied, is made by Royal Bank of Canada, RBC Capital Markets, its
affiliates or any other person as to its accuracy, completeness or correctness. All opinions and estimates contained in this report constitute RBC Capital Markets'
judgement as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Nothing in this report
constitutes legal, accounting or tax advice or individually tailored investment advice. This material is prepared for general circulation to clients and has been prepared
without regard to the individual financial circumstances and objectives of persons who receive it. The investments or services contained in this report may not be
suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about the suitability of such investments or services. This
report is not an offer to sell or a solicitation of an offer to buy any securities. Past performance is not a guide to future performance, future returns are not guaranteed,
and a loss of original capital may occur. RBC Capital Markets research analyst compensation is based in part on the overall profitability of RBC Capital Markets, which
includes profits attributable to investment banking revenues. Every province in Canada, state in the U.S., and most countries throughout the world have their own laws
regulating the types of securities and other investment products which may be offered to their residents, as well as the process for doing so. As a result, the securities
discussed in this report may not be eligible for sale in some jurisdictions. This report is not, and under no circumstances should be construed as, a solicitation to act as
securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that
jurisdiction. To the full extent permitted by law neither RBC Capital Markets nor any of its affiliates, nor any other person, accepts any liability whatsoever for any
direct or consequential loss arising from any use of this report or the information contained herein. No matter contained in this document may be reproduced or copied
by any means without the prior consent of RBC Capital Markets.
Additional information is available on request.
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October 13, 2008
RBC Canadian Financial Services Beacon
To U.S. Residents:
This publication has been approved by RBC Capital Markets Corporation, which is a U.S. registered broker-dealer and which accepts responsibility for this report and
its dissemination in the United States. Any U.S. recipient of this report that is not a registered broker-dealer or a bank acting in a broker or dealer capacity and that
wishes further information regarding, or to effect any transaction in, any of the securities discussed in this report, should contact and place orders with RBC Capital
Markets Corporation.
To Canadian Residents:
This publication has been approved by RBC Dominion Securities Inc. Any Canadian recipient of this report that is not a Designated Institution in Ontario, an
Accredited Investor in British Columbia or Alberta or a Sophisticated Purchaser in Quebec (or similar permitted purchaser in any other province) and that wishes
further information regarding, or to effect any transaction in, any of the securities discussed in this report should contact and place orders with RBC Dominion
Securities Inc., which, without in any way limiting the foregoing, accepts responsibility for this report and its dissemination in Canada.
To U.K. Residents:
This publication has been approved by Royal Bank of Canada Europe Limited ('RBCEL') which is authorized and regulated by Financial ServicesAuthority ('FSA'), in
connection with its distribution in the United Kingdom. This material is not for general distribution in the United Kingdom to retail clients, as defined under the rules of
the FSA. However, targeted distribution may be made to selected retail clients of RBC and its affiliates. RBCEL accepts responsibility for this report and its
dissemination in the United Kingdom.
To Persons Receiving This Advice in Australia:
This material has been distributed in Australia by Royal Bank of Canada - Sydney Branch (ABN 86 076 940 880, AFSL No. 246521). This material has been prepared
for general circulation and does not take into account the objectives, financial situation or needs of any recipient. Accordingly, any recipient should, before acting on
this material, consider the appropriateness of this material having regard to their objectives, financial situation and needs. If this material relates to the acquisition or
possible acquisition of a particular financial product, a recipient in Australia should obtain any relevant disclosure document prepared in respect of that product and
consider that document before making any decision about whether to acquire the product.
To Hong Kong Residents:
This publication is distributed in Hong Kong by RBC Investment Services (Asia) Limited, a licensed corporation under the Securities and Futures Ordinance or, by
Royal Bank of Canada, Hong Kong Branch, a registered institution under the Securities and Futures Ordinance. This material has been prepared for general circulation
and does not take into account the objectives, financial situation, or needs of any recipient. Hong Kong persons wishing to obtain further information on any of the
securities mentioned in this publication should contact RBC Investment Services (Asia) Limited or Royal Bank of Canada, Hong Kong Branch at 17/Floor, Cheung
Kong Center, 2 Queen's Road Central, Hong Kong (telephone number is 2848-1388).
To Singapore Residents:
This publication is distributed in Singapore by RBC (Singapore Branch), a registered entity granted offshore bank status by the Monetary Authority of Singapore. This
material has been prepared for general circulation and does not take into account the objectives, financial situation, or needs of any recipient. You are advised to seek
independent advice from a financial adviser before purchasing any product. If you do not obtain independent advice, you should consider whether the product is suitable
for you. Past performance is not indicative of future performance.
®Registered trademark of Royal Bank of Canada. RBC Capital Markets is a trademark of Royal Bank of Canada. Used under license.
Copyright © RBC Capital Markets Corporation 2008 - Member SIPC
Copyright © RBC Dominion Securities Inc. 2008 - Member CIPF
Copyright © Royal Bank of Canada Europe Limited 2008
Copyright © Royal Bank of Canada 2008
All rights reserved
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