• Profitable Canadian banking franchise with good lending market share

Attractive US banking presence offers exposure to a turnaround in the US economy

Among the fastest projected dividend growth of Canadian bank stocks in 2015

Rating	Buy–Average Risk
Target	C$64.00
Symbol	TD
Exchange	TSX, NYSE
Sector	Banks
Recent price	C$57.25, US$52.63
Total potential return	15%
52-week range	C$44.87–58.20
Shares outstanding	1,843.1m
Market capitalization	C$105,581m
TSX weighting	5.51%
Year-end	Oct-31
EPS	2013A 2014E 2015E	C$3.44 C$4.27 C$4.51
P/E	2013A 2014E 2015E	16.6x 13.4x 12.7x
Dividend	C$ 1.88
Dividend yield	3.3%

TD Bank is Canada's second largest bank by market capitalization. It has a large and very profitable Canadian personal and commercial banking franchise and what we believe to be one of the stronger brands. While Canada is viewed as a slower-growth market relative to the US, it is a higher-return market. TD's Canadian banking franchise has generated strong returns over the past few years (return on equity (ROE) of 40–50%), and we believe it is well positioned in the Canadian marketplace with a #1 share in personal loans, #2 share in mortgages and #3 share in business loans.

TD Bank also offers exposure to a turnaround in the US economy through its US retail operation (~26% of our earnings forecast for fiscal year 2015 (FY15)). It has an attractive retail footprint across the Eastern Seaboard, with a large US deposit base that should help temper pressure on net interest margins. Average loan growth in the US was 8% during the third quarter of FY14, faster than the 6% recorded by its Canadian franchise. We believe it is well positioned to grow faster than its US peers over the next two years.

The bank has an attractive wealth management franchise, which includes a strong asset management platform in Canada and a 40.4% stake in TD Ameritrade. We believe it can reap further benefits from the acquisition in the US of EPOCH Holdings which closed in May 2013. Although it no longer segments wealth management results, we believe wealth accounts for ~20% of consolidated earnings.

We have three main concerns. First, TD Bank has a notable presence in the Canadian property and casualty insurance market, and we have concerns specifically with the Ontario personal auto insurance segment. We believe this has led, and will lead, to more earnings bumps. Second, as the largest Canadian personal lender, it could be hit harder by a potential slowdown in personal lending activity (which we expect). Third, there are a few US issues to watch. Management expects US retail earnings to be flat in FY14 vs FY13, due to a slowdown in auto loans, US mortgage originations and lower security gains. This division generated 8% ROE in FY13, which we believe will not likely improve in FY14 or FY15. In our view, all three concerns are fully reflected in expectations.

TD's high profitability and strong and diverse franchises fuel its growth and support its ability to sustain above-average dividend growth. We expect TD's dividend, currently C$1.88 per share on an annualized basis, will be 12% higher at this time next year, among the fastest annual increases of the Canadian banks. Our 12-month target price is C$64, representing a 15% potential total return that includes a 3.3% current dividend yield.

• Teck is Canada's largest metals & mining company and is a significant global producer of copper, zinc and metallurgical coal

Growth should continue through the company's strong pipeline of organic growth projects, including base metals and energy projects

With a strong balance sheet, Teck features an investment-grade credit rating and a sustainable dividend

Rating	Buy–Average Risk
Target	C$29.00
Symbol	TCK.B, TCK
Exchange	TSX, NYSE
Sector	Base metals
Recent share price	C$24.69, US$22.74
Total potential return	21%
52-week range	C$22.53–31.25
Shares outstanding1	576m
Dividend yield	3.6%
Reported cash1	C$2,131m
Cash per share1	C$3.70
Reported total debt1	C$7,748m
Market capitalization	C$14,239m
Probable and proven reserves2:
Metallurgical coal	959Mt
Copper	11,650kt
Molybdenum	243kt
Zinc	6,490kt
Lead	1,130kt
Gold	1,911koz
Silver	67,130koz

Teck Resources Limited is the largest metals & mining company listed on the TSX and is a significant global producer of copper, zinc and metallurgical coal. The company remains an Americas-based miner, with its key properties all located in North and South America although it is also involved in mineral exploration worldwide.

Most of the company's profit is derived from the Coal and Copper divisions. Teck expects coal will contribute approximately one-third of its estimated 2014 cash operating profit and base metals (mostly copper) approximately two-thirds.

Growth should continue through Teck's strong pipeline of organic growth projects. In particular, the company's energy, copper and coal projects include world-class assets on which its next generation of production will be based. The project pipeline includes the Quebrada Blanca Phase 2 hypogene copper project as well as the Relincho copper project. We expect these projects will ensure that the company remains primarily a base metals producer in the long term, despite attractive growth opportunities in the Energy sector.

We are supportive of Teck's move into the energy sector through its ownership interest in the Fort Hills oil sands project, as we believe the Fort Hills investment was a better value than base metals assets of comparable size and risk profile. In our view, base metals assets of meaningful size, at an advanced development stage and in politically low-risk jurisdictions are scarce and would likely be expensive.

Teck's share price reflects investors' macroeconomic outlook. An investment in Teck enables investors to participate in the anticipated continued growth in the consumption of base metals due to overall global economic growth and increasing urbanization in developing countries. As the largest metals & mining company listed in Canada, Teck is a natural bellwether of the overall metals & mining sector. In our view, Teck behaves as a proxy for the broader metals & mining sector because the company's relatively large size, share liquidity, product diversification and mature operations allow the share price to be dependent on broader commodity and economic factors.

We apply a weighted average 1.0x target multiple to our unrisked NAV (8%) estimate to derive our one-year target price of C$29.00. We rate Teck Buy–Average Risk.

Our Precious Metals analyst, Mike Parkin, is replacing Primero Mining Corp. (P) with AuRico Gold Inc. as our best idea in the near term, given that Primero is currently working through optimizations at the new Black Fox mine while the ramp up at AuRico’s Young Davidson mine is going better than expected.

Our Precious Metals analyst, Mike Parkin, is replacing Primero Mining Corp. (P) with AuRico Gold Inc. as our best idea in the near term, given that Primero is currently working through optimizations at the new Black Fox mine while the ramp up at AuRico’s Young Davidson mine is going better than expected.