Regional banks are having a tough time competing with well-established big banks in general due to their inferior scale and less famous brand recognition. CWB is trading at a cheap valuation of only 0.7x Price/Book, but operational efficiency is not as good as the high-quality operators in the banking industry. Return on equity was around the 10% range in the last few years, which is quite weak relative to the large banks, while net margin is also lower than large banks. CWB could be an interesting value name once in a while, but we think it makes more sense to hold high-quality, more efficient banks in the long term. CWB does have energy sector exposure, which is both good and bad depending on the cycle. But for an income stock, we prefer the safety of the larger banks. We would prefer RY or TD.
5i Research Answer: