Weekly Wrap

Posted by Jamie Switzer and Marc Latta of Raymond James

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Banks Want to Hike Dividends

The head of National Bank of Canada says the industry watchdog is standing in the way of higher dividends, making him the first senior banker to speak out against what has become a growing concern for many investors……

….commentary continued below:

Market Summaries
S&P/TSX Composite up 1.6% to 12151 (up 3.4% year-to-date)
Dow Jones Industrial Avg up 0.79% to 10927 (up 4.8% ytd)
Nasdaq Composite up 0.3% to 2403 (up 5.90% ytd)
Oil (West Texas Intermediate) up 4.87 $84.87 (up $5.51 ytd)
Gold (Spot USD/oz) up $12.30 to $1119.80 (up $22.85 ytd)

2009 Personal Income Tax Filing
As you are aware April 30, 2010 is the deadline to file your personal income tax return with the Canada Revenue Agency. In April, we receive a number of requests from both clients and accountants with regards to documents required to complete your return.  Please be advised that you should now be in receipt of all pertinent information to file your return. Starting January 1, 2010 you may have received by mail and/or email the following important tax documents:

– 2009 Gain Loss Report
– T5, T3, T5008 and/or T5013
– T4RSP, T4RIF and/or T4A

***Please contact our office prior to April 21, 2010 if you require duplicate copies of any of these documents***

Banks Want to Hike Dividends

The head of National Bank of Canada says the industry watchdog is standing in the way of higher dividends, making him the first senior banker to speak out against what has become a growing concern for many investors. Since the financial crisis, the Office of the Superintendent of Financial Institutions (OSFI) has been warning banks and insurance companies not to do anything to jeopardize capital levels, such as boosting or launching major acquisitions until regulators worldwide can agree on a new set of rules for the industry.

But after last year’s near-record bank profits, many investors are growing impatient with OSFI. National Bank CEO Louis Vachon indicated last week that he is willing to increase the bank’s current payout but the regulator needs to be convinced. “From your lips to OSFI’s ears,” he told National Bank’s annual financial-services conference, suggesting shareholders need to start lobbying the regulator. Vachon said he believes the ban on dividend increases could go away as early as this year if the Canadian economy continues to improve and bank loan losses come down. “Maybe it is my hope, more than my view, that the rules for dividends, I think, are going to be looser sooner,” Mr Vachon said.

Julie Dickson, the head of OSFI, has justified the ban by pointing out that if institutions deplete their capital levels now, they could find themselves short when the new regulations come out, resulting in a potential negative impact for shareholders. Most of the attention is focused on the so-called Basel III process which will set guidelines around capital and leverage ratios. However, the US and several European countries are mulling over rules of their own which would also have a major impact. Meanwhile, industry officials are becoming increasingly worried that the process has been taken over by self-interest as regulators and politicians in different jurisdictions use the issue as a way to grab the spotlight.



  • The province’s heavy dose of tourism ads throughout the 2010 Winter Olympics and Paralympic Games seem to be paying off. A recent survey found an 11% post-Games increase in the number of US residents who have a positive impression of Vancouver. The provincial ads were run as part of the tourism campaign surrounding the Games. Media coverage in the US also had a significant effect, the study found. “In the case of the Winter Olympics held in Vancouver, there is a clear difference between prior to the Olympics and currently,” said John Nienstedt, president of California-based Competitive Edge Research and Communications, which studies how events impact the image of a host city for a large event. The provincial campaign cost $38.6 million and the Tourism Ministry estimates its ads have been seen almost 1 billion times, through various media avenues.
  • The housing and mortgage environment is in for some significant changes beginning with the first rise in mortgage rates in years. Rock-bottom rates are officially in the rear-view mirror after a slew of Canadian banks announced increases to both variable and fixed rate mortgages. In addition, the inclusion of the new lending rules as of April 1st will require first time homebuyers to pass a more stringent set of guidelines before qualifying for a mortgage. Lump in the pending HST, which will make certain purchases more expensive, and a cooling of the housing market could be in the works.
  • LinkedIn, the website synonymous with business introductions and professional hook-ups has signed an agreement with Research In Motion Ltd. A day after opening up Canadian offices, LinkedIn announced the new application for Blackberry users that should propel the business networking site into higher traffic volumes based on RIM’s huge subscriber base. This isn’t the first mobile app developed by LinkedIn – the company launched an application for Apple Inc’s iPhone in August, 2008 – but LinkedIn VP Adam Nash said his team tailors each mobile app to take advantage of the specific features of each device.
  • The much-anticipated but controversial transformation of the Arctic Ocean into a new oil & gas haven is one step closer to reality with the Obama Administration moving to open that country’s offshore areas – including the Beaufort Sea, subject of a boundary dispute with Canada – to petroleum development. President Obama announced Wednesday plans to end a moratorium on oil-and-gas drilling in almost all US coastal waters, kick-starting what’s expected to be a major push to exploit extensive undersea deposits north of Alaska – part of a total circumpolar resource that geologists believe holds up to one-quarter of the planet’s untapped hydrocarbon reserves. Canada and the US are currently contesting up to 20,000 square km’s of the Beaufort Sea, so this issue could get messy as exploration nears.

Marketwatch – A Look at the Week’s Newsmakers

Royal Bank of Canada (RY) – Barron’s has added CEO Gordon Nixon to its list of the 30 most respected chief executives in the world. Nixon was cited by the influential business weekly for “keeping Canada’s #1 bank thriving” through difficult times. Barron’s publishes the list annually and in order to qualify, CEO’s must have held their position for a minimum of 3 years. The only other Canadian company to qualify was Research In Motion and its co-CEO’s, Jim Balsillie and Mike Lazaridis.
Eacom Timber Corp (ETR) – the Doman family is back. A Richmond-based company run by the former head of Doman Industries Rick Doman, has acquired the forest-products business of Montreal-based Domtar in a deal worth up to $120 million. Eacom Timber Corp, Doman’s TSX Venture Exchange-listed company, said Monday it has agreed to buy Domtar’s forest-products operations for $80 million, plus working capital elements in the $30-40 million range. The company intends to become a major lumber producer after the deal closes, and plans to expand the company’s current client base into Europe and the Middle East. A number of North American producers are looking to capitalize on Russia’s “log export tax” which is now at 25% and is expected to go as high as 80% beginning in 2011, effectively pricing Russia right out of the export business.
Teck Resources Ltd (TCK.B) – Canada’s largest base metals producer has finally regained its investment-grade bond rating after a tumultuous stretch that saw the company staring potential bankruptcy in the face. The yield on Teck’s five-year, 9.75% notes has fallen to 4.51% from 11.2% when they were sold on May 5, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. With the dramatic turnaround, Teck is now yielding less than the overall US corporate bond market at 4.58%, according to Merrill Lynch index data.

“Quote of the Day”

“Look wise, say nothing, and grunt. Speech was given to conceal thought.” – Sir William Osler (1849 – 1919)


This newsletter expresses the opinions of the writers, Marc Latta and Jamie Switzer, and not necessarily those of Raymond James Ltd. (RJL)  Statistics and factual data and other information are from sources believed to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities.  It is not meant to provide legal, taxation, or account advice; as each situation is different, please seek advice based on your specific circumstance. RJL and its officers, directors, employees and their families may from time to time invest in the securities discussed in this newsletter. It is intended for distribution only in those jurisdictions where RJL is registered as a dealer in securities. Any distribution or dissemination of this newsletter in any other jurisdiction is strictly prohibited. This newsletter is not intended for nor should it be distributed to any person residing in the USA. Within the last 12 months, Raymond James Ltd. has undertaken an underwriting liability or has provided advice for a fee with respect to the securities of the Royal Bank of Canada. Raymond James Ltd is a member of the Canadian Investor Protection Fund.

JAMIE SWITZER | Raymond James Ltd.
Senior Vice President, Financial Advisor
North Vancouver IAS
PH: 604.981.3355 | FAX: 604.981.3376