Canadian bank stocks are among the most trusted and reliable stocks to buy on the TSX. In 2024, investors can add Canadian bank stocks to their portfolios as low-risk assets that provide a hedge against inflation and passive income in uncertain economic conditions. Read on to learn more about Canada’s banking sector, what makes Canadian bank stocks an attractive investment opportunity, and uncover the best Canadian bank stocks to buy in 2024.
Canadian Banking Industry Stats
The Canadian banking industry is renowned for its stability, innovation, and global competitiveness. Dominated by a handful of major players, including Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Nova Scotia, the industry is highly regulated, contributing to its resilience even during global financial crises.
Canadian banks offer a wide range of financial products and services, from retail banking to investment banking and wealth management. Over the past decade, the industry has adapted well to the digital era, with mobile banking and online services becoming increasingly popular in Canada.
Overall, the banking industry continues to serve as a pillar of the country’s economy, providing stability and support for businesses and individuals alike. This makes Canadian bank stocks among the most attractive investment opportunities for income-oriented investors.
Key Facts:
- Canadian bank stocks paid $26 billion in dividends to shareholders in 2022
- 99% of Canadian adults have an account at a financial institution
- 87% of Canadians trust their bank to protect their personal information
- 78% of Canadians do most of their banking digitally, online (49%) or via mobile (29%)
- Banks contribute approximately 3.6% (or almost $70 billion) to Canada’s GDP
Note: all data sourced from the Canadian Bankers Association
Are Canadian Bank Stocks A Buy Right Now?
Canada is known for its well-regulated and resilient banking sector, making Canadian bank stocks among the most secure investments that can thrive in today’s market conditions.
Several Canadian bank stocks, including Royal Bank, National Bank of Canada, Scotiabank, and Canadian Imperial Bank of Commerce, appear to be undervalued at the moment, providing investors with a unique opportunity.
In this comprehensive guide, we will dive into the current landscape of Canadian banking and highlight the key factors that make it an attractive sector for investment. We’ll also reveal a meticulously researched and curated list of the best Canadian bank stocks to buy right now.
| Stock | Rating | Market Cap | Dividend Yield |
|---|---|---|---|
| Royal Bank of Canada (RY.TO) | ⭐⭐⭐⭐⭐ | 171.573B | 5.40 (4.37%) |
| Bank of Montreal (BMO.TO) | ⭐⭐⭐⭐⭐ | 82.497B | 5.88 (4.95%) |
| National Bank of Canada (NA.TO) | ⭐⭐⭐⭐⭐ | 32.526B | 4.08 (4.23%) |
| TD Bank (TD.TO) | ⭐⭐⭐⭐ | 146.23B | 5.82 (4.88%) |
| Bank of Nova Scotia (BNS.TO) | ⭐⭐⭐⭐⭐ | 77.446B | 5.10 (6.63%) |
| Canadian Imperial Bank of Commerce (CM.TO) | ⭐⭐⭐⭐⭐ | 51.885B | 3.09 (6.23%) |
| Laurentian Bank of Canada (LB.TO) | ⭐⭐⭐ | 1.39B | 3.20 (5.71%) |
| Canadian Western Bank (CWB-PB.TO) | ⭐⭐⭐ | 2.32B | 3.20 (6.52%) |
| Equitable Group Inc. (EQB.TO) | ⭐⭐⭐⭐ | 2.93B | 2.68 (1.56%) |
| VersaBank (VBNK.TO) | ⭐⭐⭐ | 255.552M | 0.10 (0.98%) |
How To Buy The Best Canadian Bank Stocks
Today, the best investing apps make buying Canadian bank stocks on the TSX simple.
In just four easy steps, residents can receive free cash to invest in the best Canadian bank stocks and start earning dividends right away.
At Questrade, new users can simply sign up, add funds, make a trade, and receive a $50 trade commission rebate to buy the best Canadian bank stocks.
Check out our step-by-step guide on how to buy the best Canadian stocks right now.
- Click here to sign up for a Questrade account
- Fill out the required documents with accurate personal information
- Add funds to your Questrade account
- Receive a $50 trade commission rebate to invest in the best Canadian bank stocks
Top 10 Canadian Bank Stocks To Buy in 2024
Next, we will explore Canada’s banking sector and highlight the 10 best Canadian bank stocks to buy in 2024.
These banks have been carefully selected based on various criteria, including financial strength, market position, growth prospects, and investor confidence. The top Canadian bank stocks represent a diverse range of institutions operating on national and regional levels.
Royal Bank ranks first on the list of the best Canadian bank stocks in 2024, but there are several other intriguing opportunities in the market. National Bank, Bank of Nova Scotia, and Canadian Imperial Bank of Commerce are all among the top 10 best Canadian stocks to buy right now.
Check out our list of the best Canadian bank stocks below.
- Royal Bank of Canada (RY.TO)
- Bank of Montreal (BMO.TO)
- National Bank of Canada (NA.TO)
- TD Bank (TD.TO)
- Bank of Nova Scotia (BNS.TO)
- Canadian Imperial Bank of Commerce (CM.TO)
- Laurentian Bank of Canada (LB.TO)
- Canadian Western Bank (CWB.TO)
- Equitable Group Inc. (EQB.TO)
- VersaBank (VBNK.TO)
Note: all stock data sourced from Yahoo Finance. Accurate as of Oct. 30, 2024.
Analyzing The Best Canadian Bank Stocks To Buy Right Now
As the global economy evolves and financial markets continue to fluctuate, investing in reputable Canadian banks can offer stability and potential growth opportunities.
Currently, the best Canadian bank stocks offer potential capital appreciation and a history of consistent dividend payments at very low risk. Using a combination of computer algorithms and expert analysis, we’ve ranked the top 10 Canadian bank stocks based on their financial performance, market position, growth potential, dividend history, and other key factors.
Below, we’ll discuss each bank’s strengths, weaknesses, and potential risks to help Canadians make more informed investment decisions.
1. Royal Bank of Canada (RY.TO) — Best Canadian Bank Stock To Buy Right Now
- Rating: ⭐⭐⭐⭐⭐
- 52 Week Range: 111.66 – 175.04
- Avg. Volume: 4,400,009
- Market Cap: 243.061B
- PE Ratio (TTM): 15.22
- EPS (TTM): 11.29
- Earnings Date: Dec 4, 2024
- Forward Dividend & Yield: 5.68 (3.31%)
- Ex-Dividend Date: Oct 24, 2024
Trading less than 20 percent off its all-time highs, Royal Bank (RY) offers a strong investment opportunity due to its leading market position, robust financial performance, and commitment to innovation.
Royal Bank’s focus on digital transformation and customer-centric solutions has allowed it to stay ahead in an evolving industry.
As one of the largest banks in Canada, RY enjoys a leading market position, instilling confidence in its stability and reliability. The bank’s robust financial performance and adherence to risk management strategies further solidify its reputation.
For the last 20 years, Royal Bank has demonstrated its commitment to providing investors with increasing dividends and capital returns. The Canadian bank stock has since become a safe haven for investors looking to offset risk in their portfolio and provide a steady stream of passive income through consistent dividend payments.
One of the best Canadian bank stocks to buy right now, Royal Bank offers a forward dividend yield of 4.37 percent. With a dividend payout of $5.40 per share, Royal Bank stock is sure to be an attractive option for investors looking for exposure to the best bank stocks in Canada.
2. Bank of Montreal (BMO.TO) — History of Dividend Payments & Potential Growth
- Rating: ⭐⭐⭐⭐⭐
- 52 Week Range: 105.31 – 133.95
- Avg. Volume: 3,111,435
- Market Cap: 93.175B
- PE Ratio (TTM): 14.70
- EPS (TTM): 8.89
- Earnings Date: Dec 5, 2024
- Forward Dividend & Yield: 6.20 (4.85%)
- Ex-Dividend Date: Oct 30, 2024
With a market capitalization of $82.497 billion, Bank of Montreal (BMO) is a sizable and established player in the banking industry.
As one of the largest banks in Canada, BMO enjoys a diverse and well-established business portfolio, including retail banking, wealth management, and capital markets.
For nearly four decades, Bank of Montreal has demonstrated resilience and stability, with consistent earnings growth and a track record of prudent risk management. Furthermore, BMO offers an enticing forward dividend yield of 4.95% with a dividend payout of $5.88 per share, making it one of the best dividend stocks in Canada.
The Canadian bank’s commitment to delivering shareholder value is evident through its history of regular dividend payments and share buyback programs. BMO’s focus on digital innovation and customer-centric services positions it well to navigate the evolving banking landscape.
While there are risks inherent in the banking industry, BMO’s strong financial position, diversified revenue streams, and conservative approach to risk management mitigate these concerns.
Overall, BMO’s stable market position, history of strong financial performance, attractive dividend yield, and commitment to innovation make it an attractive investment option for long-term investors seeking exposure to the Canadian banking sector.
3. National Bank of Canada (NA.TO) — Rising Dividend Payments From Canada’s Fastest-Growing Bank
- Rating: ⭐⭐⭐⭐⭐
- 52 Week Range: 86.96 – 134.23
- Avg. Volume: 1,706,111
- Market Cap: 45.69B
- PE Ratio (TTM): 13.07
- EPS (TTM): 10.27
- Earnings Date: Dec 4, 2024
- Forward Dividend & Yield: 4.40 (3.28%)
- Ex-Dividend Date: Sep 27, 2024
Steady earnings growth and effective risk management practices underscore National Bank’s stability as a safe and reliable investment option.
National Bank has been Canada’s fastest-growing bank over the last decade. It offers a growing dividend yield that makes it attractive to investors seeking a passive stream of income. As of this writing, National Bank’s offers a forward dividend yield of 4.23% with a dividend payout of $4.08 per share.
In addition to growing dividend payments, National Bank stock has appreciated nearly 500 percent over the last decade, more than any of Canada’s other major financial institutions.
Thanks to its commitment to innovation, NA is well-positioned to adapt to changing market dynamics and capitalize on emerging opportunities.
And with a relatively low price-to-earnings ratio (PE ratio), the stock remains attractively valued compared to its earnings potential.
4. TD Bank (TD.TO) — Will The Top Canadian Bank Stock Catch Up To Its Peers?
- Rating: ⭐⭐⭐⭐
- 52 Week Range: 73.67 – 87.99
- Avg. Volume: 8,102,390
- Market Cap: 135.27B
- PE Ratio (TTM): 17.91
- EPS (TTM): 4.32
- Earnings Date: Dec 5, 2024
- Forward Dividend & Yield: 4.08 (5.27%)
- Ex-Dividend Date: Oct 10, 2024
Not only is TD Bank one of the largest in Canada, it ranks among the largest financial institutions in North America.
The company’s market cap recently exceeded $145B and it offers the highest exposure south of the border with more than 40% of revenue coming from the U.S.
One of the best Canadian bank stocks to buy right now, TD Bank has not performed as well in the market compared to some of its competitors in 2024.
Yet, there are still plenty of reasons to buy TD Bank stock in 2024. Trading more than 20 percent off of its all-time highest, there is suddenly room for growth following its recent pullback.
Despite uncertain financial conditions, TD Bank stock is considered a safe investment by most analysts and its forward dividend yield of 4.88% provides an appealing income stream for investors.
TD’s customer-centric approach sets it apart in the industry. The North American bank has invested in innovative technologies and digital solutions to enhance customer experiences and drive operational efficiency, allowing it to adapt to customer preferences in a changing banking landscape.
5. Bank of Nova Scotia (BNS.TO) — Most Undervalued Canadian Bank Stock in 2024
- Rating: ⭐⭐⭐⭐⭐
- 52 Week Range: 55.90 – 74.29
- Avg. Volume: 4,777,051
- Market Cap: 89.905B
- PE Ratio (TTM): 12.73
- EPS (TTM): 5.71
- Earnings Date: Dec 3, 2024
- Forward Dividend & Yield: 4.24 (5.84%)
- Ex-Dividend Date: Oct 2, 2024
Scotiabank is one of the most undervalued Canadian bank stocks right now.
The Bank of Nova Scotia is still trading more than 30 percent off of its all-time highs and is suddenly just 13 percent away from its COVID-19 lows.
Driven by its strong market presence, robust financial performance, and favorable long-term outlook, Bank of Nova Scotia (BNS) has established itself as one of the best Canadian bank stocks to buy in 2024.
With a focus on stability and growth, BNS has established itself as a prominent player in the banking sector. The bank’s solid track record of delivering consistent earnings and profitability makes it an attractive choice for investors seeking long-term returns.
Investors can also benefit from BNS’s generous dividend yield of 6.63 percent, making it the major Canadian bank with the highest dividend yield. The forward dividend of $4.24 is competitive with the top banks in Canada.
With a market cap of $77.446B, Scotiabank’s high dividend yield and potential for capital appreciation make it an attractive opportunity for passive income investors that want exposure to Canadian banks.
6. Canadian Imperial Bank of Commerce (CM.TO) — Best Canadian Bank Stock For Dividend Investors
- Rating: ⭐⭐⭐⭐⭐
- 52 Week Range: 49.60 – 88.30
- Avg. Volume: 3,698,037
- Market Cap: 83.195B
- PE Ratio (TTM): 12.74
- EPS (TTM): 6.91
- Earnings Date: Dec 5, 2024
- Forward Dividend & Yield: 3.60 (4.09%)
- Ex-Dividend Date: Sep 27, 2024
Like Scotiabank, CIBC has not been friendly to investors of late.
Over the past five years, the stock has actually fallen by nearly five percent, offsetting come of the gains from its healthy dividend yield.
However, the Canadian bank stock appears to be gaining strength and might be one of the cheapest Canadian bank stocks to buy given history of aggressive growth.
For investors seeking passive income opportunities, look no further than the Canadian Imperial Bank of Commerce.
With a competitive dividend yield of 6.23 percent and a forward dividend of $3.48, CIBC provides Canadians with a steady income stream to weather even the most difficult economic conditions.
There are also plenty of other reasons for investors to be optimistic.
Currently trading 30 percent off of its all-time highs, CIBC Bank stock is showing strength by holding previous support levels, a good sign for potential future growth.
CIBC stock’s price-to-earnings ratio (PE ratio) of 10.65 and earnings per share (EPS) of $5.19 also suggest an attractive valuation compared to industry peers.
7. Laurentian Bank of Canada (LB.TO) — Regional Bank Stock With High Dividends
- Rating: ⭐⭐⭐
- 52 Week Range: 24.45 – 29.49
- Avg. Volume: 306,803
- Market Cap: 1.161B
- PE Ratio (TTM): 6.89
- EPS (TTM): 1.25
- Earnings Date: Dec 5, 2024 – Dec 9, 2024
- Forward Dividend & Yield: 1.88 (7.71%)
- Ex-Dividend Date: Oct 1, 2024
Laurentian Bank is an intriguing investment option for Canadian investors seeking exposure to the banking sector.
With a market capitalization of 1.39 billion, Laurentian Bank might not command the same market share as one of the top six major banks, but it still holds an important place in Canada’s financial landscape.
One of the key strengths of Laurentian Bank lies in its focus on personalized customer service and niche markets, allowing it to differentiate itself from larger competitors. This customer-centric approach enables the bank to cultivate long-term relationships and build customer loyalty.
While it is still trading above its COVID-19 lows, Laurentian Bank stock is still nearly 100 percent below its all-time highs posted in 2017.
However, the stock is more volatile than some of its industry competitors and its dividend yield of 5.71 percent still falls short of some of Canada’s largest banks, which is part of the reason it dropped down the list.
8. Canadian Western Bank (CWB-PB.TO) — Regional Canadian Bank With West Coast Focus
- Rating: ⭐⭐⭐
- 52 Week Range: 17.71 – 25.75
- Avg. Volume: 5,914
- Market Cap: 3.534B
- PE Ratio (TTM): 6.68
- EPS (TTM): 3.79
- Earnings Date: Dec. 6, 2024
- Forward Dividend & Yield: 1.59 (6.30%)
- Ex-Dividend Date: Oct 22, 2024
As a regional bank with a focus on the West Coast, Canadian Western Bank (CWB) offers a unique value proposition.
Despite being a new company, it offers a competitive dividend yield of 6.52 percent and a forward dividend of 1.08, allowing members to offset some of their risk over the long run. The Canadian bank stock is also near the bottom of its 52-week range, offering the potential for capital appreciation in both the near and distant future.
The bank’s strong presence in the region positions it to benefit from the robust economic growth and resource-driven industries in Western Canada.
CWB’s customer-centric approach and personalized banking services foster strong relationships with clients, promoting customer loyalty and retention.
This emphasis on customer satisfaction enables CWB to cater effectively to the specific needs of its target market, distinguishing it from larger competitors.
9. Equitable Group Inc. (EQB.TO) — Leading Canadian Alternative Lender
- Rating: ⭐⭐⭐⭐
- 52 Week Range: 70.01 – 109.13
- Avg. Volume: 54,045
- Market Cap: 4.161B
- PE Ratio (TTM): 11.64
- EPS (TTM): 9.31
- Earnings Date: Dec 4, 2024
- Forward Dividend & Yield: 1.88 (1.73%)
- Ex-Dividend Date: Sep 13, 2024
As a leading alternative lender in Canada, Equitable Group operates with a unique market position and a focus on mortgage lending and savings solutions.
The company has consistently demonstrated strong financial performance, and thanks to rising interest rates, it appears well-positioned for robust earnings and a healthy balance sheet.
Over the past five years, the stock has doubled in price and it has shown strength after rebounding from its COVID-19 lows. Trading at $66, the stock recently claimed a new year-to-date high, putting it on our watchlist among the best Canadian bank stocks.
Equitable Group’s history of consistently growing dividend payments is another reason to consider investing in the stock. In fact, dividend payments have doubled from .185 to .37 since the start of 2022. Currently, it offers a dividend yield of 2.13 percent and a forward dividend of $1.48 per share.
Additionally, the company’s diversified mortgage portfolio and disciplined approach to credit risk management should help it weather any future economic downturns, making it a safe investment for income-oriented investors.
10. VersaBank (VBNK.TO) — Growing Digital Canadian Bank
- Rating: ⭐⭐⭐
- 52 Week Range: 10.16 – 21.55
- Avg. Volume: 15,479
- Market Cap: 548.108M
- PE Ratio (TTM): 11.99
- EPS (TTM): 1.76
- Earnings Date: Dec 11, 2024 – Dec 16, 2024
- Forward Dividend & Yield: 0.10 (0.47%)
- Ex-Dividend Date: Oct 4, 2024
VersaBank represents the future of banking and is one of the best intriguing investment opportunities in the Canadian banking industry.
As a digital-focused bank, VersaBank leverages technology and innovation to provide efficient and convenient banking solutions to its customers. The bank’s strategic focus on digital banking services positions it well to capitalize on the growing trend of digitalization in the financial sector.
VersaBank’s strong financial performance is evidenced by its consistent profitability and healthy balance sheet. The bank’s disciplined risk management practices and prudent lending standards contribute to its stability and resilience in the face of market challenges. Additionally, VersaBank’s cost-effective operating model and streamlined processes enable it to deliver competitive products and services while maintaining operational efficiency.
Furthermore, VersaBank’s customer-centric approach emphasizes personalized banking experiences and responsive customer service. By leveraging technology, the bank offers innovative digital banking solutions that cater to the evolving needs and preferences of its customers. This customer-centric focus strengthens customer relationships and fosters long-term loyalty.
The bank’s strategic growth initiatives, including partnerships and collaborations, enable VersaBank to expand its customer base and reach new market segments. Moreover, VersaBank’s strong capital position provides a solid foundation for future growth and investment opportunities.
Investors should be aware of potential risks associated with VersaBank, such as regulatory changes, cybersecurity threats, and market volatility. However, with its digital banking expertise, solid financial performance, customer-centric approach, and growth initiatives, VersaBank presents an attractive investment proposition for investors seeking exposure to the evolving landscape of the Canadian banking industry.
What Are Canadian Bank Stocks?
Generally considered a safe investment, Canadian bank stocks refer to the publicly traded shares of banking institutions operating in Canada.
These stocks represent ownership in Canadian banks, allowing investors to participate in the performance and profitability of these financial institutions.
Investing in bank stocks can provide investors with the opportunity to benefit from the stability and growth potential of the banking sector in Canada. These stocks are influenced by various factors, including interest rates, economic conditions, regulatory changes, and financial performance.
The Canadian banking sector is composed of several major and regional banks.
Some of Canada’s largest banks include Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), Bank of Nova Scotia (Scotiabank), Bank of Montreal (BMO), and Canadian Imperial Bank of Commerce (CIBC), among others.
These banks offer a wide range of financial services, including retail banking, commercial banking, investment banking, wealth management, and insurance.
Types of Canadian Bank Stocks
All Canadian banks are not created equal. Most major Canadian banks offer a comprehensive list of products and services designed to meet the needs of various individuals. Meanwhile, other banks in Canada provide different products and services tailored to specific customers.
Below, we’ll break down the different types of banks in Canada.
- Major Canadian Banks
- Regional Banks
- Foreign Banks with Canadian Operations
- Mortgage Lenders and Mortgage Investment Corporations (MICs)
- Financial Services Providers with Banking Operations
Major Canadian Banks
Major Canadian banks represent the largest and most prominent institutions in the country’s banking sector.
These banks include Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), Bank of Nova Scotia (Scotiabank), Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC), and National Bank of Canada. They offer a comprehensive range of financial services, have a national presence, and tend to have significant market capitalization.
As a result, these banks are among the best Canadian stocks to buy and hold in your retirement account.
Regional Banks
Regional banks are smaller banks that operate within specific regions or provinces in Canada.
While they may have a more localized customer base, regional banks still provide a range of banking services similar to major banks. Examples of regional banks include Laurentian Bank of Canada and Canadian Western Bank.
These banks often focus on niche markets and cater to the needs of specific communities or industries.
Foreign Banks with Canadian Operations
Some foreign banks operate in Canada alongside domestic banks, providing services to Canadian customers.
These banks often have a global presence and bring international expertise to the Canadian market.
HSBC Bank Canada and BNP Paribas Canada are two prominent examples of foreign banks with Canadian operations.
Mortgage Lenders and Mortgage Investment Corporations (MICs)
Mortgage lenders and MICs specialize in providing mortgage financing to individuals and businesses.
While they may not offer the full suite of banking services, they play a significant role in the Canadian real estate market.
Home Capital Group and Equitable Group Inc. are two mortgage lenders that rank among the best Canadian bank stocks.
Financial Services Providers with Banking Operations
Finally, there are also financial services providers that have banking operations as part of their broader service offerings. These institutions may offer a combination of banking, insurance, and wealth management services.
Examples include Power Corporation of Canada, which owns Great-West Lifeco, a major insurer with banking operations through its subsidiary Canada Life.
Canadian Bank ETFs
Investors that don’t want to pick individual stocks can still gain exposure to Canadian bank stocks by buying ETFs.
ETFs, or exchange-traded funds, are investment funds that are traded on stock exchanges. They typically aim to track the performance of a specific index or sector.
In the case of Canadian bank ETFs, they specifically focus on Canadian banks, allowing investors to diversify their holdings across multiple banks within a single investment vehicle. Some examples of Canadian bank ETFs include:
- BMO Equal Weight Banks Index ETF (TSX: ZEB)
- CI First Asset CanBanc Income Class ETF (TSX: CIC)
- BMO Covered Call Canadian Banks ETF (TSX:ZWB)
These are just a few examples, and there may be other Canadian bank ETFs available in the market. Read on to learn more about these Canadian bank ETFs below.
iShares S&P/TSX Capped Financials Index ETF (XFN)
This ETF tracks the performance of the S&P/TSX Capped Financials Index, which includes Canadian banks among other financial companies.
BMO Equal Weight Banks Index ETF (ZEB)
This ETF provides equal-weight exposure to the largest Canadian banks, giving each bank an equal allocation within the portfolio.
RBC Canadian Bank Yield Index ETF (RBNK)
This ETF seeks to track the performance of the Solactive Canadian Bank Yield Index, which focuses on Canadian bank stocks with higher dividend yields.
How Do Canadian Banks Make Money?
Like the best Canadian stocks, banks earn sustainable profits that position them for success over the long run.
Canadian banks generate revenue through various avenues, allowing them to make money and sustain their operations.
Banks make money primarily through the interest they earn on loans and the fees they charge for various financial services. This interest income is generated by lending money to individuals, businesses, and institutions at higher interest rates than the rates paid on deposits.
Canadian banks also earn revenue from non-interest sources, such as fees for transactions, advisory services, credit cards, and wealth management.
Here are some of the different revenue streams that Canadian banks use to make money.
- Net Interest Income
- Non-Interest Income
- Wealth Management
- Capital Markets
- Insurance
- Asset Management
- Other Financial Services
Let’s go into further detail about some of the different ways that Canadian banks make money.
Net Interest Income
The primary source of revenue for banks is the interest income earned from lending activities. Banks take deposits from customers and lend that money to individuals, businesses, and institutions at higher interest rates. The difference between the interest earned on loans and the interest paid on deposits is known as net interest income.
Non-Interest Income
Canadian banks also generate revenue through non-interest income streams. This includes fees and commissions from providing various financial services such as transaction fees, account maintenance fees, advisory services, credit card fees, and foreign exchange services. Non-interest income diversifies their revenue sources and reduces dependence solely on interest income.
Wealth Management
Many Canadian banks have wealth management divisions that offer services such as investment advisory, portfolio management, and brokerage services. These services generate fee-based income through managing clients’ investment portfolios and providing financial advice.
Capital Markets and Investment Banking
Canadian banks engage in capital markets and investment banking activities, including underwriting debt and equity offerings, providing mergers and acquisitions advisory services, and facilitating trading activities. They earn fees and commissions through these services, capitalizing on market transactions and corporate deals.
Insurance
Some Canadian banks have insurance subsidiaries or offer insurance products through partnerships. Insurance products, such as life insurance, home insurance, and travel insurance, generate premiums and contribute to the banks’ overall revenue.
Asset Management
Banks often have asset management divisions that manage investment funds, pension funds, and other investment vehicles. Asset management generates fees based on the size and performance of the managed assets.
Other Financial Services
Canadian banks may offer additional financial services, including leasing, factoring, and treasury services. These services provide additional revenue streams beyond traditional banking activities.
Comparing The Top Canadian Bank Stocks On The TSX
Even though Canadian bank stocks are considered safe investments, choosing which bank to invest in can be difficult, especially for beginners.
When comparing the top Canadian bank stocks, investors have a range of options to consider.
Each bank has its own unique strengths, market position, and financial performance.
Royal Bank of Canada (RBC) is known for its strong market presence and consistent earnings growth. Meanwhile, Toronto-Dominion Bank (TD) stands out for its expansive North American footprint and focus on customer experience. On the other hand, Bank of Nova Scotia (Scotiabank) offers exposure to international markets and has a solid dividend history.
By examining the chart below, investors can further evaluate the financial metrics, stock performance, and dividend yields of these top Canadian bank stocks to make informed investment decisions.
Check out the chart below for a comprehensive comparison of the top Canadian bank stocks.
| Stock | Rating | 52 Week Range | Avg. Volume | Market Cap | PE Ratio (TTM) | EPS (TTM) | Earnings Date | Forward Dividend & Yield | Ex-Dividend Date |
|---|---|---|---|---|---|---|---|---|---|
| Royal Bank of Canada (RY.TO) | ⭐⭐⭐⭐⭐ | 116.75 – 140.18 | 4,046,319 | 171.573B | 12.09 | 10.12 | Aug 24, 2024 | 5.40 (4.37%) | Jul 25, 2024 |
| Bank of Montreal (BMO.TO) | ⭐⭐⭐⭐⭐ | 111.88 – 137.64 | 2,373,160 | 82.497B | 11.52 | 10.04 | Aug 29, 2024 | 5.88 (4.95%) | Jul 27, 2024 |
| National Bank of Canada (NA.TO) | ⭐⭐⭐⭐⭐ | 82.16 – 104.83 | 1,635,507 | 32.526B | 10.16 | 9.31 | Aug 30, 2024 | 4.08 (4.23%) | Jun 23, 2024 |
| TD Bank (TD.TO) | ⭐⭐⭐⭐ | 76.32 – 94.05 | 6,382,019 | 146.23B | 9.85 | 7.92 | Aug 24, 2024 | 5.82 (4.88%) | Jul 07, 2024 |
| Bank of Nova Scotia (BNS.TO) | ⭐⭐⭐⭐⭐ | 58.55 – 77.74 | 3,521,716 | 77.446B | 9.36 | 6.76 | Aug 29, 2024 | 5.10 (6.63%) | Jul 05, 2024 |
| Canadian Imperial Bank of Commerce (CM.TO) | ⭐⭐⭐⭐⭐ | 82.35 – 122.73 | 2,118,423 | 51.885B | 10.65 | 5.19 | Aug 24, 2024 | 3.09 (6.23%) | Jul 05, 2024 |
| Laurentian Bank of Canada (LB.TO) | ⭐⭐⭐ | 32.53 – 52.19 | 248,936 | 1.39B | 6.89 | 4.64 | Sep 01, 2024 | 3.20 (5.71%) | Jun 23, 2024 |
| Canadian Western Bank (CWB-PB.TO) | ⭐⭐⭐ | 24.89 – 38.93 | 253,957 | 2.32B | 4.39 | 3.79 | Aug 31, 2024 | 3.20 (6.52%) | Jul 03, 2024 |
| Equitable Group Inc. (EQB.TO) | ⭐⭐⭐⭐ | 83.62 – 152.42 | 47,314 | 2.93B | 5.74 | 13.37 | Aug 10, 2024 | 2.68 (1.56%) | Jun 01, 2024 |
| VersaBank (VBNK.TO) | ⭐⭐⭐ | 8.60 – 10.62 | 5,611 | 255.552M | 8.87 | 1.11 | Aug 29, 2024 | 0.10 (0.98%) | Jul 06, 2024 |
Which Canadian Bank Stocks Pay The Highest Dividend?
Canadian bank stocks with the highest dividend yields can be attractive to income-oriented investors seeking regular cash flow from their investments.
By investing in bank stocks with high dividend yields, Canadians can potentially benefit from a steady stream of income and the potential for capital appreciation without incurring too much risk.
That’s because some of the best Canadian bank stocks typically offer higher dividend payouts compared to their peers in the sector.
Here is a list of the Canadian bank stocks that pay the highest dividend yields:
- Scotiabank — 6.63%
- Canadian Western Bank — 6.52%
- CIBC — 6.23%
- BMO — 4.95%
- TD Bank — 4.88%
Investing in Canadian Bank Stocks
In Canada, the banking sector is known for its stability and resilience due to rigorous regulations.
As a result, the top Canadian bank stocks consistently demonstrate strong financial performance and provide shareholders with consistent dividends and potential capital appreciation.
Known as a safe investment, Canadian bank stocks provide diversification benefits, acting as a hedge against market volatility.
Overall, investing in the best bank stocks allows Canadian investors to benefit from stability, strong financial performance, competitive returns, a resilient economy, and portfolio diversification.
Let’s compare the advantages and disadvantages associated with buying the best Canadian bank stocks.
|
Advantages |
Disadvantages & Risks |
| ✅ Stability and Resilience |
❌ Economic and Market Risks |
|
✅ Dividend Income |
❌ Regulatory and Legal Risks |
| ✅ Strong Financial Performance |
❌ Credit and Loan Risks |
|
✅ Exposure to a Diverse Economy |
❌ Competitive Environment |
| ✅ Blue-Chip Status |
❌ Interest Rate Sensitivity |
|
✅ Potential for Capital Appreciation |
❌ Concentration Risk |
| ✅ Access to a Wide Range of Financial Services |
❌ Market Volatility |
Advantages of Buying Canadian Bank Stocks
By investing in Canadian bank stocks, you have the potential to earn a steady income and benefit from the strength of the banking sector in Canada.
Canadian banks are known for being stable and reliable. They pay regular dividends, which means you can earn money from your investment on a consistent basis.
The best Canadian bank stocks have a strong position in the market and are backed by regulations that help keep them secure, providing traders with a sense of confidence in their investment.
The Canadian economy is also generally stable, which can contribute to the growth and success of these banks.
Here are some of the main advantages of investing in Canadian bank stocks.
- Stability and Resilience
- Dividend Income
- Strong Financial Performance
- Exposure to a Diverse Economy
- Blue-Chip Status
- Potential for Capital Appreciation
- Access to a Wide Range of Financial Services
We’ll break down each of the advantages of buying Canadian bank stocks in further detail below.
Stability and Resilience
Canadian banks are renowned for their stability and resilience, thanks to robust regulatory frameworks and sound risk management practices. They have weathered economic downturns and financial crises relatively well, providing a sense of security to investors.
Dividend Income
Canadian banks have a long-standing history of paying regular dividends to their shareholders. This makes them appealing to income-oriented investors seeking consistent cash flow from their investments.
Strong Financial Performance
Canadian banks have consistently demonstrated strong financial performance, driven by their diversified revenue streams and prudent lending practices. Their ability to generate sustainable profits over time contributes to their attractiveness as investment options.
Exposure to a Diverse Economy
Canadian banks operate in a diverse and stable economy, encompassing various sectors such as finance, energy, technology, and natural resources. By investing in Canadian bank stocks, investors gain exposure to the broader Canadian economy and its potential for growth.
Blue-Chip Status
Many Canadian banks are considered blue-chip stocks, characterized by their large market capitalization, established reputation, and industry leadership. Investing in blue-chip stocks like Canadian bank stocks is often seen as a relatively safe and solid long-term investment strategy.
Potential for Capital Appreciation
While dividends provide regular income, Canadian bank stocks also have the potential for capital appreciation over the long term. As the banking sector thrives and the banks continue to expand their operations, stock prices may increase, allowing investors to benefit from capital gains.
Access to a Wide Range of Financial Services
Investing in Canadian bank stocks provides indirect access to a wide range of financial services offered by these institutions. This includes retail banking, commercial banking, investment banking, wealth management, insurance, and more. The diversified business models of Canadian banks provide exposure to various segments of the financial sector.
Disadvantages and Risks Buying Canadian Bank Stocks
While they aren’t as risky as buying penny stocks, investing in Canadian bank stocks still comes with certain risks.
Like other stocks on the TSX, Canadian bank stocks can be affected by economic conditions and market fluctuations, leading to price volatility. These stocks are subject to broader market forces and investor sentiment, which can impact their overall performance.
Next, changes in interest rates can significantly influence the profitability of banks and consequently affect their stock prices. Fluctuations in interest rates can impact borrowing costs, loan demand, and the overall financial performance of banks.
Lastly, investing in individual bank stocks carries specific risks related to the banking sector.
This includes exposure to specific bank-related risks and the potential concentration of investments in a single industry, which can increase portfolio vulnerability.
Here is a quick list of the potential risks and disadvantages that come with investing in Canadian bank stocks.
- Economic and Market Risks
- Regulatory and Legal Risks
- Credit and Loan Risks
- Competitive Environment
- Interest Rate Sensitivity
- Concentration Risk
- Market Volatility
Below, we’ll uncover the disadvantages and risks associated with buying Canadian bank stocks.
Economic and Market Risks
Canadian bank stocks can be affected by economic factors and market conditions. Economic downturns, fluctuations in interest rates, and market volatility can impact the performance of bank stocks. Factors such as inflation, unemployment rates, and changes in consumer behavior can also influence the profitability of banks.
Regulatory and Legal Risks
The banking industry is subject to stringent regulations, and changes in regulations or legal developments can impact banks’ operations and profitability. Compliance with regulatory requirements and potential legal issues can create additional challenges and uncertainties for banks and their investors.
Credit and Loan Risks
Canadian banks are exposed to credit risks, as their profitability depends on the quality of loans and the ability of borrowers to repay them. A rise in loan defaults, particularly during challenging economic times, can negatively affect banks’ financial performance.
Competitive Environment
The Canadian banking sector is highly competitive, with several major banks vying for market share. Increased competition can put pressure on banks’ profit margins and hinder their ability to attract and retain customers. Technological advancements and the rise of fintech companies also pose challenges and disrupt traditional banking models.
Interest Rate Sensitivity
Canadian banks’ profitability is sensitive to changes in interest rates. Fluctuations in interest rates can impact the net interest margin—the difference between interest earned on loans and interest paid on deposits—which can influence banks’ earnings and stock prices.
Concentration Risk
A few major banks dominate the Canadian banking sector. Investing heavily in a single bank or being overly concentrated in the banking sector may expose investors to higher levels of risk. Diversification across different sectors and asset classes is important for managing risk in an investment portfolio.
Market Volatility
Canadian bank stocks are subject to market fluctuations and investor sentiment, like any publicly traded stocks. Stock prices can experience volatility due to broader market trends, geopolitical events, and investor perceptions of the banking sector’s outlook.
Are Canadian Bank Stocks A Safe Investment?
Most large Canadian banks are considered blue-chip stocks, which can also be found on the Canadian Dividend Aristocrat list and in a variety of ETFs.
As a result, Canadian bank stocks are generally considered to be safe investments.
Many investors from Canada opt to buy the top bank stocks in their RRSP, TFSA, or FHSA account, which can help compound their wealth over time. Since each type of investing account has its own advantages, it’s important to consult with a financial advisor about which option is best for your particular situation.
Canada’s strong regulatory environment ensures that banks adhere to stringent oversight and risk management practices, helping to minimize risk for potential investors.
Canadian banks are also known for their financial stability, maintaining healthy capitalization and robust balance sheets. Diversified revenue streams, including interest income and non-interest income, contribute to this overall stability.
Additionally, the resilience of the Canadian economy and the history of regular dividends further enhance the appeal of buying bank stocks in Canada.
How Do Interest Rates Impact Canadian Bank Stocks?
Buying Canadian bank stocks means that investors are exposing themselves to interest-related risks.
Interest rate risk refers to the potential impact of changes in interest rates on the value and performance of bank stocks.
When interest rates rise, it can increase borrowing costs for consumers and businesses, potentially leading to reduced loan demand and lower profitability for banks.
This, in turn, can impact the stock prices of banks negatively.
On the other hand, when interest rates decline, it may stimulate borrowing and economic activity, benefiting banks and potentially driving stock prices higher.
Last but not least, changes in interest rates can influence the yield curve, affecting the profitability of banks’ lending and investment activities.
What To Look For In The Best Canadian Bank Stocks
When it comes to investing in Canadian bank stocks, several key factors must be considered to identify the best opportunities.
First, it is important to examine a company’s financial performance and dividend history. Many Canadian banks have a history of increasing dividends and maintaining dividend payments even during challenging economic conditions.
Some Canadian bank stocks are currently undervalued, providing dividend investors with an excellent opportunity to capitalize on passive income and potential price appreciation.
Before buying stocks in Canadian banks, investors should consider the following factors in order to make an informed investment decision:
- Financial Performance
- Dividend History
- Regulatory Environment
- Market Position and Competitive Advantage
- Risk Management
- Economic Outlook
- Valuation
- Analyst Recommendations and Research
- Macroeconomic and Geopolitical Factors
- Diversification
Read on to dive deeper into each of these factors.
Financial Performance
Evaluate the bank’s financial health, including its profitability, earnings growth, and return on equity. Look for stable revenue growth, strong earnings, and a solid balance sheet.
Dividend History
Examine the bank’s dividend history, including its track record of dividend payments and the consistency of dividend increases. A stable and growing dividend can be attractive for income-oriented investors.
Regulatory Environment
Consider the regulatory landscape and the bank’s compliance with regulations. Assess the effectiveness of the regulatory environment in ensuring the stability and soundness of the banking sector.
Market Position and Competitive Advantage
Analyze the bank’s market share, competitive positioning, and ability to differentiate itself from competitors. Look for factors that give the bank a competitive edge, such as a strong brand, customer loyalty, and innovative offerings.
Risk Management
Evaluate the bank’s risk management practices, including its approach to credit risk, interest rate risk, and market risk. Assess the bank’s ability to effectively identify, measure, and manage risks.
Economic Outlook
Consider the broader economic conditions and outlook for the Canadian economy. Evaluate how factors such as interest rates, GDP growth, employment levels, and housing market conditions may influence the bank’s performance.
Valuation
Assess the valuation of the bank’s stock by considering key valuation metrics such as price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and dividend yield. Compare these metrics to industry peers to gauge the stock’s relative value.
Analyst Recommendations and Research
Review research reports and analyst recommendations on the bank’s stock. Consider the opinions and insights of financial analysts who closely follow the banking sector.
Macroeconomic and Geopolitical Factors
Keep an eye on macroeconomic factors, geopolitical events, and regulatory changes that may impact the banking industry as a whole. Consider potential risks and uncertainties associated with these factors.
Diversification
Avoid overexposure to a single bank or sector by diversifying your investment portfolio. Consider spreading investments across multiple Canadian bank stocks or diversifying across other sectors to mitigate risks.
Should You Buy The Best Canadian Bank Stocks Right Now?
In conclusion, investing in the best Canadian bank stocks can offer numerous benefits for investors.
Not only are Canadian bank stocks safe investments, but they also offer potential capital appreciation and consistent dividend income, making them perfect for passive income investors.
These banks have a history of stability, strong financial performance, and a commitment to dividend payments.
Buying the best Canadian bank stocks helps investors minimize risk, especially during economic downturns and periods of increased volatility.