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Financial Stocks Roundup: Why Are Canada's Banks Among the Strongest?


Prudential and Allstate are also in the news.

Visa (V) reported a 46% gain in profits last quarter as the biggest payment processing company in the world experienced higher transaction volume from increased spending. The company, which released the report yesterday afternoon, also revealed that US antitrust authorities are investigating the company for fee changes that it put into place in response to regulations that hurt its market share. Visa shares are down 3.41% today.

Prudential Financial (PRU) shares fell 9.55% today after reporting an unexpected loss. Analysts expected earnings of $1.71 per share on revenue of $10.48 billion, but increased disability claims and currency fluctuations, mostly related to the Japanese yen's decline against the US dollar, resulted in a loss of $2.09 per share.

Prudential's rival insurance company, Allstate (ALL) reported that earnings jumped 46% thanks to dramatically lower catastrophe losses and improvements in its home insurance unit. Allstate shares rose 4.83% today.

Financial stocks are faring worse than the Dow (^DJI) and S&P 500 (SPY) today. The Financial Sector Select SPDR ETF (XLF) declined 0.71%. The major banks saw their share prices decline in today's session. Morgan Stanley (MS) shares dropped 4.04%, leading the big banks down. Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC) also fell today.

Bloomberg Markets' ranking of the 20 strongest banks is dominated by Canadian banks. The only US banks to make the list were JPMorgan Chase, PNC Financial (PNC), and BB&T Corp. (BBT). Canadian regulators have required the country's banks to keep Tier 1 capital ratios from going below 10% from as early as 1999. Basel I only requires a minimum ratio of 8% and Basel III, which allows 6% ratios, will go into effect in 2015. The conservative banking regulations in the country enabled Canadian banks to make it through the financial crisis in better shape. Toronto Dominion Bank (TD) used its comparative advantage to acquire US-based lenders. It is now the third biggest lender in New York City.

Twitter: @vincent_trivett
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