canadian bank Q2 earnings summary

The big five Canadian Banks have now all reported their second quarter earnings. Many times within these releases the numbers will always focus on the banks results versus analysts' expectations. The majority of these banks beat expectations.

Below is how the the banks fared versus last year's Q2, on an earnings per share, excluding extraordinary items basis. This is a measure of how their continuing operations are holding up amid this recession:

Bank of Montreal (BMO) = Down 25% from last year

Canadian Imperial Bank of Commerce (CIBC) = Down 12% from last year

Toronto Dominion Bank (TD) = Down 7% from last year

Bank of Nova Scotia (BNS) = Down 16% from last year

Royal Bank of Canada (RY) = Down 10% from last year

All dividends were maintained, and none were raised.

canadian banks look frothy

Canada has recently been lavished with praise because of the strength of their financial institutions amid all of the global financial turmoil. Despite this halo effect, these banks have had their challenges. Royal Bank of Canada (RY) just took a large write down on their US assets. That may be a bell weather for other institutions such as Toronto Dominion (TD) and Bank of Montreal BMO), who also have large assets in the US.

I can’t help but thinking that Canadian banks are not looking attractive right now as investments whatsoever. With headwinds of further write-downs, low consumer confidence, increasing unemployment, increasing loan losses, and Canadian real estate value declines, the big 5 Canadian lenders share prices look downright frothy. This is quite a change from a few months ago when you could have bought some of the banks at decade lows and towering yields.

Let’s look at Royal Bank of Canada (RY) as an example for the group:
How quickly things can change. Royal Bank was trading at $26 in late February and is now changing hands at $43. That means that the stock was yielding 7.7% back in February and is now paying out more like 4.7% of their share price in dividends. That is dramatic rise in share price of 65%!

The P/E ratio is now 13.4x for a company that just took a $850M write-down and is facing multitude of pressure brought about by a recession. There is very little probability of any dividend growth in the short term so investors don’t have much to look forward to in the next two years in that arena. When Royal yields north of 7%, I would argue that as long as they don’t cut their dividend, buying might be wise; however 4.7% does not carry the same appeal.

You could look at all five banks and probably see a similar pattern. The rally in these banks recently looks overdone to me and I believe the expectation currently built up in their share prices is not realistic. The risk return on these investments is not attractive at the current level because the potential short to mid term return has probably evaporated and the risk still exists.

how my crystal ball has worked

I don't really shy away from making predictions and bets when it comes to the stock market because I don't mind being wrong, and hey...it's fun. I wanted to check up on a few of the predictions I've made on this blog to date and see how I made out.

Prediction #1 Canadian Financial Stocks Have Bottomed
On April 18, 2008, I declared the bottom on Canadian financial stocks to be March 17, 2008 ($21.50 was the level of XFN, an ETF that tracks these stocks). Well I was wrong on this one as currently the bottom is looking more like it actually occurred on July 15, 2008 ($20.00 on XFN). Or is the bottom yet to come...?

Prediction #2 The Candian Dollar Will Weaken To Levels Well Below $1USD in 2008, & Buying UPS, JNJ, and MO Now Might Be a Good Way To Benefit From This
On November 9, 2007 I posted about this and recommended UPS, JNJ, and MO when the Canadian dollar traded at about $1.06 USD. I was right on this one, as the Loonie now trades at $0.93 USD. If you had bought the stocks here is how you would have fared after currency conversion. These are the currency adjusted returns before any dividends.
UPS +9.4%
JNJ +22.3%
MO +5.8%

Prediction #3 Bank of America Will Not Cut Its Dividend
On November 3, 2007 I used some of my valuable Canadian dollars to buy some Bank of America, claiming that this purchase made a lot of sense as long as the big bank didn't cut its dividend. Well I was right on this one, so far. Bank of America is still paying out the same $0.64/ share that they were at that time, and while they failed to raise the dividend at their usual time of year, they have not cut it, yet....

TD raises dividend

TD Bank Financial Group (TD) raised its quarterly dividend from $0.59 to $0.61. This represents a raise of 3.4%. TD has been raising dividends twice per year since at least 1999.

Here is a glance at TD's recent dividends paid per year:
2004: $1.40
2005: $1.64
2006: $1.84
2007: $2.20
2008: $2.40 EST
*dividend schedule was changed in late 2006 causing an overlap effect after this point

This represents a compound annual growth rate (CAGR) of dividends of 14.4%.

View the TD WikiChart on Wikinvest

the most popular dividend in America

In my short history following stocks and participating in the stock market, I can't remember a set of dividends that was so anticipated, and so questioned as the upcoming Bank of America (BAC) pay outs. In November, 2007 when I purchased Bank of America shares I asked the question, Will Bank of America continue to raise its dividend year after year, and survive this credit crunch just as they have survived every financial crises in the past. At the time BAC was yielding 5.7% and I was betting that they would not cut their dividend, and that they would survive the credit crunch. Needless to say that even though I purchased BAC when the Loonie was trading around $1.07 vs. the Greenback, I am currently underwater on my BAC position.

Fast forward to today where BAC yields a whopping 7.8% and the CEO, Ken Lewis recently made the following comments:
Chief Executive Officer Ken Lewis said on Monday the second-largest U.S. bank has no plans to cut its dividend. "You have to do what is in the best interest of the company, but we see no reason to cut the dividend," Lewis said "

Should we believe Ken? Considering all the dividend payments in the U.S. banking sector that have fallen by the wayside, I'm not sure. WaMu, Citi, and Wachovia among others, have all cut their dividend since November, 2007. It does seem that Ken left some ambiguity in his statement. He sees no reason to cut right now, but he may see a reason in the future; if he does he'll do what is in the best interest of the company.

The next few dividend payments that BAC pays out will tell the story. If BAC raises their dividend within the next few payments I am certain that several dividend investors will be adding to their positions or getting in for the first time, as these yield levels are hard to pass up for a bank with such a solid history of dividend growth. One would have to assume that because of where BAC is trading today (7.8% yield), the market is pricing in a dividend cut.

BNS earnings down, dividend up

The dividend train continues to roll on at Bank of Nova Scotia (BNS), which is a Canadian bank with large Latin America operations. BNS reported a 6% drop in second quarter profit from 2007 levels, but they still managed to increase their quarterly dividend by 4.3% from $0.47 to $0.49. I always appreciate the raise as a shareholder. Higher provisions for credit losses and lower capital markets revenue contributed to the earnings decline. Scotiabank said it was unlikely to meet its objective of 7 to 12 percent growth in earnings per share for the year, even as it noted that second-quarter results were better than the first quarter's, and other signals pointed to a stronger second half. The bank also did not rule out acquisitions of cheap U.S. banks in the near future.

This dividend raise by BNS continues the pattern of 2 increases per year going back a few years. The stock is now yielding 4.1%. Royal Bank of Canada (RY) on the other hand actually failed to increase their semi-annual dividend last quarter which ended the pattern they held since January 2005. I summarized the first quarter in the Canadian banking world back in March.

From BNS Investor Relations
The following is a record of increases in the quarterly dividend per common share for the fiscal period 2005 to 2008:

Fiscal 2008 - 1st quarter - increased from 45 cents to 47 cents. 3rd quarter - increased from 47 cents to 49 cents.
Fiscal 2007 - 1st quarter - increased from 39 cents to 42 cents. 3rd quarter - increased from 42 cents to 45 cents.
Fiscal 2006 - 1st quarter - increased from 34 cents to 36 cents. 3rd quarter - increased from 36 to 39 cents.
Fiscal 2005 - 1st quarter - increased from 30 cents to 32 cents. 3rd quarter - increased from 32 to 34 cents.

'sell Royal Bank' - citi

As the credit crunch rages on, the latest arrow comes from Citigroup, who have downgraded Royal Bank of Canada (RY) to a 'SELL'.

Citi analyst says, "In our view, as the largest of the Canadian banks, Royal likely has significant exposure to the deteriorating credit markets. Given the bank's size, C$632B in assets and diversified lines of business we think long term the bank will be able to withstand the current credit crunch. In the near term, we anticipate credit related write downs to adversely impact earnings and book value. We also expect increased provisions for loan losses as credit trends continue to deteriorate. "

No doubt Royal has exposure to melting credit markets, and given their size they do have their hands in a lot of cookie jars. It is important to note though that Royal derives a significant portion of the revenue from Canadian retail banking, as well as Canadian wealth management, which are in healthier current states and will buoy them. One of the large Canadian banks, in fact the largest and arguably the best positioned and strongest, being rated as a 'Sell' is likely a rare call in Canada or the U.S. for that matter. If Citi's call comes to fruition this could be a great opportunity for long term dividend growth investors. Citi changed their target price for shares of RY from $47 to $40.

Royal trading at $40/share (citi's target price) means:
P/E = under 10x trailing EPS
Dividend Yield = pushing 5%

It is reassuring for Citi to point out that Royal should survive the credit crisis long term and thus should not go bankrupt due to it. I'm glad they pointed this out, as I would have assumed the bank would fail. (sense the sarcasm here)

Toronto Dominion Bank purchase

Today I initiated a full position in Toronto Dominion Bank (TD). TD will now make up about 10% of my non registered portfolio. Since TD is such a widely held stock in a widely followed industry in Canada; instead of a detailed post describing my thoughts on TD, and rationale behind the purchase, and valuation, I thought I would briefly list the most important factors that went into this decision. As always, opinions and comments are appreciated.

My decision to invest in TD for the long term right now was based on:

• industry leading retail bank in Canada, operating within an oligopoly; I am attracted to retail banking as it tends to lend itself more towards consistency, loyalty, brands, and repeatable revenue and earnings
• the credit crisis has improved the valuation of all banks; to a certain degree the babies were thrown out with the bathwater, TD has little exposure and is 15% off it's 52 week high
• the above point is true to a large extent with U.S. banks; I'd like to entrust TD to acquire for me skillfully and take advantage of good value in U.S. institutions
• TD has a great history of earnings and dividend growth and currently sports a dividend pay out ratio of only 38%, and a solid yield of 3.7%

the last temptation of BMO

The ongoing credit crisis has unearthed some rare gems for investors, but whether some of these gems turn out to be fools gold remains to be seen. It is no surprise that one of these opportunities has appeared in the Canadian banking sector, as these stocks lie near the heart of the ABCP fall out and the credit crisis mess. BMO's share price has nearly been chopped in half since around this time last year. Due to this massacre in share price, BMO's yield has crept up to a staggering 7.2%. This yield level is absolutely unprecedented for a Canadian bank. You could buy BMO shares today and receive 7.2% annually back on your investment even if the stock flat lined for years. Combine this with the favourable tax treatment of dividends for Canadian residents and many would be satisfied with that investment return. Of course this is assuming they don't cut their dividend. That unfortunately is the $700 million dollar question. If BMO did happen to cut their dividend in half, they could instantly have about $700 million extra to work with annually. Whether the bank feels they would need this capital to compensate for write-offs or investment losses remains to be seen. There are also several other factors at play including the eventual true value of written down assets, as well as the banks reputation, culture, and dividend policy.

Several months ago BMO was being used as an example of a stock that one could buy by employing some leverage in a Smith Manoevre type strategy by using a home equity line of credit (HELOC) to essentially make mortgage interest tax deductible. People saw BMO shares as a prime candidate for this type strategy given their high, stable yield, and dividend growth history. At this time BMO was yielding around 4 - 4.5%. It is interesting to look back at this now. Are all of the pieces of the puzzle still in place for BMO as a candidate for leveraged investing? The yield is certainly high, there is no arguing that, but I'm not sure how stable it is, and I don't have the utmost confidence in their ability to grow dividends from the current level in the short to mid term. This just goes to show how quickly and dramatically change can occur in markets and thus stocks. If BMO cuts their dividend dramatically you would have to say this is a worst case scenario for those who bought it last year in leveraged accounts. Not only do you lose precious income that would have gone to interest expense but the value of your investment will have roughly coincided with the dividend drop. For those who factored many possible negative scenarios into their strategy in the planning phase, and assuming they've diversified appropriately they will likely still stand a good chance of mid to long term success using this strategy.

So should we buy BMO now? Should it be bought now that the yield is 7.2% and maximum negativity in the name seems to be close at hand? I would argue, like many others have, that the yield is a bright red flag indicating a warning of a dividend cut. If a high dividend yield is the only thing attracting me to the stock, then I don't want it in my portfolio. BMO's recent performance and short term outlook are murky at best, and I don't really think the bank has much going for it when compared to their Canadian competitors. Currently there is no shortage of attractively valued Canadian banks with reasonable pay out ratios, strong recent performance, good management, and solid balance sheets. A yield over 4% in BNS, RY, and TD is nothing to sneeze at when you consider some of their other fundamentals, outlook, and market position. All three also look reasonably valued using earnings growth models.

Although some would say that the most successful long term strategy has been to just close your eyes and buy the current worst performing Canadian bank. You can judge this buy simply buying the one with the highest dividend yield. For me, this just doesn't feel right....I'd rather keep my eyes open...

canadian bank follow up / summary

Last month in my post regarding the state of Canadian bank dividends, I noted that an analyst (Robert Sedran) commented about the possibility that Royal Bank (RY), TD Bank (TD), Bank of Montreal (BMO), and CIBC (CM) may forgo dividend increases this quarter as profits decline. Canadian banks have been raising dividends twice per year, but he commented that dividend increases could be postponed because average profits before one-time items could be down around 1.4%. He would view any increases as a bullish sign.

I'd like to follow up on this post by reviewing what has transpired earnings-wise, particularly for the Canadian banks that I follow:

TD Bank (TD) - Profit rose 5%. Raised dividend 3.5% to $0.59/quarter. This dividend increase is 'on schedule', however the increase is at a slower rate than the bank has been in the habit of raising. TD was the darling of the Canadian banking sector this quarter. They have no subprime exposure, less emphasis on capital markets, and their Canadian retail franchise is strong. TD's dividend increase, although smaller, could be viewed as a bullish sign for the bank going forward.

Royal Bank (RY) - Profit declined 17%. Did not raise dividend. This lack of a dividend increase stops their streak of semi-annual raises which they have maintained going back to January 2005. The strong Canadian dollar, weakness in capital markets, and charges related to U.S. asset backed paper and subprime exposure.

Bank of Montreal (BMO) - Profit declined 27%. Did not raise dividend, did not cut dividend. This lack of a dividend increase stops their streak of semi-annual raises which they have maintained going back to 2003. Write downs, investment banking losses, and credit provisions were blamed, and the bank does not expect to meet it's annual targets in 2008.

Bank of Nova Scotia (BNS) - Profit declined 18%. Scotia was not due or expected to raise their dividend. Profit in international operations, the strong loonie and credit provisions were blamed.

In summary Sedran was probably optimistic for the quarter compared with what occurred. TD Bank has to be viewed as the strongest player right now as they are less involved in the messes south of the border, and producing some good numbers in Canada. It seems BNS, RY, and TD have all been taking advantage of the strong loonie by purchasing non Canadian assets lately, which could turn out to be wise long term.

bank dividends braking or gearing down?

Robert Sedran, an analyst from National Bank Financial, writes about the possibility of Canadian banks putting dividends on hold. Specifically Royal Bank (RY), TD Bank (TD), BMO (BMO), and CIBC (CM) may forego dividend increases this quarter as their profits decline, he writes. He goes on to say that Canadian banks typically raise dividends twice per year, but they may postpone increases because average profits before one-time items should be down about 1.4%. He will view any increases as a bullish sign.

It will be very interesting to see what comes to pass here. Canadian banks have been raising dividends at fabulous rates over the past 5 years. No doubt that the operating environment for these banks has softened. The capitial markets, wealth management, loans including subprime, and the general economy do seem soft currently when compared with the last few years. These banks in the past have all shown that they can continue to raise dividends and average out making more money on a year to year basis even in tough economic times. Fee-based revenue and retail banking probably really prop them up in poor times.

Royal Bank (RY) for example had a target pay out ratio (dividends paid divided by earnings per share) in 2007 of 40-50%; they ended up coming in at 43%. For 2008 their target remains at 40-50%. As you can see there is a little wiggle room in those numbers. Earnings can be flat, while dividends continue to grow, and this could continue as long as their outlook remains so that the pay out ratio comes back down into the desired range. Bank of Montreal (BMO) on the other hand may be getting close to the top of their targeted range, especially when you include recent one-time items; their targeted range is 45-55%.

This analyst's viewpoint and comments are indicating that he believes the '2 times per year' dividend raising habit may be lost for this year for these 4 banks. He does not seem to be doubting an annual raise all together for the banks.

In a separate article, analysts doubt Bank of Montreal (BMO) will raise dividend at all in 2008.

talking the dividend talk

"We have not changed our philosophy on the dividend, and we are proud of our record of 30 years of annual increases in the common share dividend."

This is an approximate quote from Bank of America (BAC) CEO Ken Lewis on the company's fourth quarter conference call this morning where they announced a profit drop of 95% in the quarter. Apparently in maintaining appropriate capital ratios going forward Lewis may choose to pare back share repurchases, raise capital, etc.; he seemed to indicate that the dividend is either safe or is regarded as sacred to the company's plans. Lewis also projected 2008 profit to be well above $4/share, whereas analysts expect $4.33. 'Well above' $4 per share in profit is a nice increase on 2007's EPS which is now finalized at $3.30/share. Lewis did mention that this is all barring 'a new market shock'.

While this can not be misconstrued as 100% assurance that Bank of America will not cut their dividend, the type of language and emphasis Lewis used has me taking notice. Being a dividend growth investor for the long term, I get really interested when a great company with temporary problems like BAC is yielding 6.8%, and is confident enough to put priority on their long term dividend growth philosophy. This statement tips me off that BAC is serious about maintaining their dividend and will use other means necessary to maintain capital ratios.

Based on this positive dividend and earnings growth guidance, I may add to my position in the coming weeks.

pc financial - (andy)

As promised I have enlisted the help of a guest poster to cover off some topics that are of interest to him. I'm not certain how many posts I will be able to get out of him, but the more the better as he is a financially smart individual. Let's just say when it comes to personal finance and the road to wealth I believe he 'gets it'. Without further adieu, let me introduce this thirty-something man named Andy (not his real name).

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With the major Canadian banks constantly competing for everyone’s business, I’ve decided to use PC Financial as my preferred financial institution, and below are the main reason why:

• No Fee Chequing Account - With the major banks offering various personal chequing accounts with monthly fees ranging from $3.95/month up to $24.95/month, it’s hard to believe that more people aren't switching over to a PC chequing account. With zero fees, a person can make as many transactions as they wish and not pay a single penny for them. I recently purchased a DVD from a major electronic store with a Christmas gift card and unfortunately the DVD cost 12 cents more than the amount available on the gift card. I had absolutely no cash on me and there were about 10 people in line behind me so the option of running out to the car to find loose change was out of the question. Luckily I had my PC banking card with me; swipe the card, punch in my code, and out the door I walk with my DVD and I never had to worry about a transaction fee.


• High Interest Savings Account - With an interest rate of 4.10% it’s a great place to park my money while I decide which stocks or ETFs I want to purchase through my discount brokerage account. All I need to do is hold a daily balance over $1,000.00, and I receive one of the highest interest rates available on the entire amount, plus a bonus interest amount on my balance on each annual anniversary date.


• Low Cost Personal Line of Credit - The cost of borrowing money is only prime + 1.25% (currently 7.25%). This is an incredible rate when comparing it to the major bank’s lines of credit.


• Low Initial Cost for Secured Line of Credit - Most banks charge a one time cost of up to $450.00 to set-up a secured line of credit. PC charges only $150.00. I personally do not have a secured line of credit as I do not believe in paying the fee, since a personal line of credit costs nothing to set-up.

*PC Financial did not compensate Andy or I for this post.

doubled Bank of Nova Scotia position

I started a position in the Canadian bank, Bank of Nova Scotia (BNS) at around $47.50 during a steep sell off back in August, 2007. For my comments on the bank, please see my 'bought some BNS' post.

Today I added to my BNS position by doubling my stake in the internationally oriented bank. I paid $47.39/share today; therefore before fees I bought the bank at a yield of 4.0%, and a P/E of 11.7x earnings. My models suggest that Scotia is very undervalued at it's current price. The stock is currently priced for anemic growth going forward. I believe it offers compelling value down here at its current level.

Bank of Nova Scotia has a superb earnings growth record, is very efficient, and is diversified between domestic operations and significant non-U.S. assets. They have also proven themselves as a swift grower of dividends over the long term.

Bank of America purchase

I initiated a position at $45.00 yesterday in one of my 'cheap stocks', Bank of America Corporation (BAC). Here is a brief summary on the company:

Bank of America is one of the world's largest financial institutions, serving individual consumers, small and middle market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk-management products and services. The company provides unmatched convenience in the United States, serving more than 55 million consumer and small business relationships with more than 5,700 retail banking offices, nearly 17,000 ATMs and award-winning online banking with more than 20 million active users. Bank of America is the No. 1 overall Small Business Administration (SBA) lender in the United States and the No. 1 SBA lender to minority-owned small businesses. The company serves clients in 175 countries and has relationships with 98 percent of the U.S. Fortune 500 companies and 80 percent of the Global Fortune 500. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.

Some Company Highlights

• Acquired LaSalle Bank Corp. (large Chicago based bank) in 2007
  
• Owns a 9% stake in China Construction Bank


• Owns the MBNA credit card company


• Serves 76% of the U.S. population


• Largest U.S. bank


• Operates all over the world


• #1 bank in the state of California


• Bank has a multicultural focus, which are growing demographics

Key Stock Information and Valuation
According to my models the stock is now priced to grow their earnings at a 4-5% clip for the next 10 years

• Yield = 5.7%, at a historically high level


• Stock is almost 20% below its 52 week high


• Price / book value is 1.6, which is lower than anytime except in 2000


• Return on Equity is always above 15%


• Dividends have been raised at a very good clip for a very long time.

Rationale for Purchase

The purchase rationale of BAC at these levels is an example of a spot where I think that the risk/reward is tilted far to the reward side. The only real risk with this purchase would be BAC cutting their dividend. Recent analyst remarks regarding Citigroup potentially cutting their dividend have added fuel to fire for the unloading of these banks. There is no greater fear for a dividend growth investor than the potential of a company cutting its dividend. In my opinion this news is partially the reason why BAC is finding new lows. I do not believe BAC will cut their dividend and by making this purchase, I am making a monetary bet on that fact. I really do not much care if more credit writeoffs and further fears cause BAC's shares to fall further, as long as they do not cut the dividend, and continue on their strong history of raises, I may buy more.

Let's use a conservative scenario and assume that BAC's shares are flat after one year and the Canadian dollar remains at these lofty ($1.07) levels; if this occurs my return for the year is about 5.6% (my dividend yield) before tax and I can likely look forward to another dividend increase in August, 2008. Then again if the Canadian dollar should fall, and BAC's shares rise, I would be in a much better situation immediately.

See the charts below for BAC's dividend and share price history.

Dividend History for Bank of America.



Share Price History.

Will there be more pain to come for U.S. banks? How will this affect their shares?

Will Citigroups dividend be cut? Will BAC's dividend be cut?

Will the Canadian dollar remain at $1.07 and above?

All great points for debate. For me the only true question I had to ask to justify this purchase was:

Will Bank of America continue to raise its dividend year after year, and survive this credit crunch just as they have survived every financial crises in the past?

be like the banks?

I tend to think that I know a little bit about investing, why currencies fluctuate, and how to spot value in the stock market. Even given this confidence in my modest investing acumen, I am obviously no match for the superior thinkers that are employed in the mergers and acqusitions departments at large institiutions like the Toronto Dominion Bank (TD), Canadian National Railway (CNR), or the Royal Bank of Canada (RY). It seems to me that those involved in making these high level decisions at these large companies have decided that now seems like as good a time as any to be buying U.S. assets. Recently these three companies and others in Canada have all been involved in takeovers of U.S. companies using our strong Canadian Dollar to buy up Uncle Sam's own.

I've often thought that a great metaphor for one's household expense system might be a corporation's. We all have cash flow as earnings, capital expenditures, debts, and investments that we want to grow or product income, just like corporations do. If Ed Clark from TD Bank thinks now is a good opportunity to buy a 8 Billion dollar U.S. bank, and the high Canadian dollar is at least one of the reasons for doing so, should I be taking a bias to buying U.S. assets as well, to try to grow my capital? To be fair, part of the reason that TD decided to buy Commerce Bancorp (CBH) was probably because of the weakness of the U.S. banking sector currently as a result of the ongoing credit crunch, but it is hard to imagine that the tremendous strength of the Canadian Dollar doesn't have anything to do with this trend. A trend that we may see continue, if you believe a certain MSNBC loudmouth with rolled up sleeves.

'relationship' banking

Recently I had the rare opportunity to actually meet with a live staff member of our home branch at the Bank of Montreal concerning our line of credit. In today's age of online banking complete with Epost, direct withdrawals, and messaging features, I am usually staring at a screen when I interact with BMO.

I have to smile as I remember the days when I would stroll into the bank as a kid with one of my parents who would spend some time filling out those little yellow slips in order to make a withdrawal or deposit, at the 'stand up' desk while waiting in line.

I noticed during our meeting the word 'relationship' kept coming up. I am usually adamant about shopping around, and looking for value when making my purchasing decisions in life, but this got me thinking.... I know it is in BMO's best interest to lull me into a 'relationship' with them, so that I will mindlessly pay them fees and interest because they are the comfortable choice; but could this arrangement actually help me?

Is there any way someone of my meagre financial stature could benefit from a 'relationship' with a bank?

Perhaps getting to know one of their financial managers by name and not having to introduce myself each time I go in for a meeting might be a good idea. Perhaps as the years go by and I grow my assets, pay off my debts, and accumulate wealth I could benefit from a 'relationship' by obtaining a lower interest rate, flexible terms, or better service. Perhaps if I can develop this 'relationship' now, BMO could better interest rates offered by anyone else including what a broker could find, when my mortgage is up in 3 years. They did seem a little disappointed that we did not have our mortgage with them. If they know me by name, know my stable and reliable history, and loyalty, could this benefit me in the long run?

Do they want my business enough to go the extra mile?

Is this 'relationship' worth my time, should it be just another tool in my arsenal that I use before I shop around, or should I pass it off as a marketing ploy?

I would be curious what thoughts and experiences others have in this area.