The Big Six banks usually come out of a recession quite well. Each has provisions for loan losses with diverse portfolios that allow for them to save up and pay off the losses gone through during a downturn. But of all of them, Royal Bank of Canada (TSX:RY) is the largest by market capitalization.
Royal Bank stock currently has a market cap at about $186 billion as of writing, which is about $40 billion higher than the next-highest Big Six bank. It’s found long-term growth through lucrative strategies that have set it up for solid success.
And yet, shares of Royal Bank stock are down 10% in the last year, and it trades in value territory at 12.38 times earnings. Plus, there’s a dividend yield at 4.15%. But hold off! Royal Bank stock is likely about to drop further. When it does, buy it in bulk.
Why is it going to drop?
While the Big Six banks and bank stocks in general have fallen in recent weeks, it’s important to note that we aren’t even in a recession yet! When this happens, the market will react poorly. And the stocks that are likely to fall dramatically first and foremost are the Big Six banks.
Now, I don’t suggest that you try and time a market bottom. I merely am trying to guide you to a time when you might possibly get the best bang for your buck. Because while Royal Bank stock is down 10%, it likely has further to go.
We can see this by looking at past recession. During the Great Recession, shares fell by over 40%, for example. The stock hasn’t come close to this yet. Should you buy at these low rates, you only have up to go. Whereas it could take some time to recover should you buy today.
Not that that’s necessarily a bad idea
Honestly, though, when it comes to Royal Bank stock, you can’t go wrong, as long as you’re investing long term. The company has been around since 1864, and in that time, it has taken on incredibly lucrative revenue streams.
About two-thirds of Royal Bank stock’s revenue comes from Canada, with the rest mainly in the United States. However, this continues to expand, especially in emerging and global capital markets and its wealth management segment.
If you get down to the numbers, the bank has the largest amount of assets under management among the Big Six banks. Further, its growth strategy focused on wealth and commercial clients both in Canada and the U.S. through City National prime it for even more growth in the near future. And it’s already paying off, with more room to grow across the U.S.
Then there’s the acquisition of HSBC Canada, and while it’s not one of the Big Six banks, it gives Royal Bank stock another increase of the market share in Canada.
Bottom line
Should you buy Royal Bank stock today, it would still be worth your time. Shares could recover to former 52-week highs within the year. That alone could create a potential upside of 11% as of writing. But should it drop further, you could be in for an even bigger payday. At the very least, I urge you to wait until an official recession announcement comes down the line. Then buy Royal Bank stock in bulk.
