Deborah Baic/The Globe and Mail
An interesting milestone occurred last week for the Canadian banks, Barclays Capital analyst John Aiken wrote in a note to clients Tuesday morning.
"For the first time in the past three years (and just over a year ago from the recent bottom), a Canadian bank set an all-time high (split-adjusted) share price," he noted.
That bank would be Toronto-Dominion, whose share price was $76.50 at the close on Thursday, above its previous high of $76.33, which it hit on Oct. 1, 2007.
"It has been a wild ride over the past three-plus years, with the Canadian banks dropping more than 60 per cent on average from their previous highs before staging a very impressive recovery starting a little over a year ago," Mr. Aiken noted.
On average, the banks are up 10 per cent since they began reporting their first-quarter results in late February, he added.
"The fact that TD has achieved a new peak valuation highlights the significant outperformance that the Canadian banks have generated over the past year," Mr. Aiken wrote.
He thinks the valuations are stretched, and prefers U.S. bank stocks over Canadian bank stocks in an economic recovery scenario "as the U.S. banks have not benefited to the same degree as the Canadian banks from multiple expansion."