“Against the backdrop of rising long-term interest rates year to date, ALL the Canadian yield-heavy sectors have underperformed. However, from our perspective each of these areas are excessively oversold and are extremely overdue for a sharp reversal to the upside once interest rate concerns stabilize.
“We think winners=Apartments and Strip Retail, while Industrial , Office and Regional Malls=more challenged. Geographic winners=Halifax and perhaps Ontario, while Vancouver, Edmonton and Quebec lagged … Our ratings are intact heading into Q1 results. Top Growth Picks=BAM , CAR , CIGI , CSH , GRT , IIP and SVI . Top Value Picks=BN , DIR , and REI .
“The group delivered an adjusted ROE of 13.8% in 2023, 610bps below the 5-year average before the GFC, reflecting a sharp decline in NIM and much lower leverage. The sharp decline in leverage was a direct result of much higher capital requirements related to the introduction of Basel III and all its iterations. Without a sharp increase in NIM, we do not believe medium-term ROE guidance is achievable.
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