Best Canadian Bank Stocks

This Page's Content Was Last Updated: October 27, 2022
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What You Should Know

  • The Canadian banking system mainly consists of very few large and diversified banks.
  • These banks are safe and dependable compared to the US banks.
  • Canadian banks could grow their dividend consistently because of their high fees permitted by weak competitive environment in Canadian banking.

List of Top Canadian Bank Stocks

CompanyMarket cap ($B)Dividend YieldP/EP/B
Market capitalization and dividend yield are extracted from TMX, while returns are from Morningstar on 31 August 2022. P/E and P/B are from TMX on 2 September 2022.
CompanyTotal annual return
Market capitalization and dividend yield are extracted from TMX, while returns are from Morningstar on 31 August 2022. P/E and P/B are from TMX on 2 September 2022.

Royal Bank of Canada stock (RBC stock) and Toronto-Dominion Bank (TD stock) are the two most significant components of the S&P/TSX Composite Index, with weights of 5.4% and 4.8%, respectively, while Bank of Nova Scotia stock (BNS stock) and Bank of Montreal stock (BMO stock) are the 7th and 8th largest TSX stocks with weights of 2.8% and 2.7%, as of 25 August 2022. Further, the financial sector is the largest sector in the S&P/TSX Composite Index, with a weight of 31%. In addition to banking stocks, the Canadian financial sector includes Canadian insurance stocks and Canadian wealth management stocks.

How Canadian Banks Are Doing?

Over the past six months, the main story in economic and financial circles has been the high inflation rate forcing central banks to raise interest rates. Higher interest rates often mean a higher margin on the loans. Even though rates are going up, they are still below the inflation rate for secured loans. So over the past six months, both loan volume and margin increased.

So earnings from retail banking operations have been robust. But higher interest rates and, more importantly, the uncertainty in the market has materially reduced corporate deals. This means that investment banking has made little money in 2022. The other effect of higher rates is deflation in asset prices. Lower asset prices mean lower fees gathered by asset managers.

Therefore the past eight months have been a mixed story for diversified banks. Higher-income from commercial banking while lower income from investment banking and asset management. Historically banks have been top TSX performers, and we think they will likely continue their relative outperformance. Among them, we think National Bank has an attractive valuation.

Thus Canadian bank stocks, as critical components of the TSX index and, more importantly, as essential components of the Canadian economy, are worthy of specific attention. Canadian banks are known for their dependable and growing dividend income.

Historically, large and diversified banks under the watchful eyes of a single strong regulator make up Canada’s financial system. In comparison, the US financial system historically included many smaller banks supervised by several competing regulators. The system in the US has given rise to more robust securities markets and cheaper banking services. But those cheaper services have encouraged more risk-taking by US banks and frequent episodes of financial instability.

Large and diversified banks discussed here do not just offer chequing accounts, saving accounts, credit cards and GICs. They do foreign exchange operations, domestic money transfers and international money transfers, they offer advice and asset management, and they offer insurance.

Some exchange-traded funds enable one to invest in the Canadian banking sector. Among them, The BMO Equal Weight Banks Index ETF (ZEB), Hamilton Enhanced Canadian Bank ETF (HCAL), Hamilton Canadian Bank Mean Reversion Index ETF (HCA) and Covered Call Canadian Banks (ZWB) are noteworthy. The performance of these funds is charted on this page.

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Royal Bank of Canada (RBC)

Royal Bank of Canada (RBC)

As of 8 September 2022

rbc logo
ExchangeTSX, NYSE
Ticker SymbolRY
50 Day Avg Vol.3,934,933
Number of Shares1,391,712,298
Dividend Growth (5 Year)5.56%/year
Return on Equity17.78%
Return on Assets0.93%

RBC stock has performed very well over recent history as its 15-year return is 3.8 times the return of the TSX index. RBC is a financial services company and the largest Canadian bank by market capitalization. RBC was founded in 1864 in Halifax as “the Merchants Bank of Halifax.” The Merchants Bank of Halifax spent the latter part of the 19th century expanding in maritime provinces.

Merchant Bank changed its name in 1901 when it wanted to expand westward to the rest of Canada. Expansion to the rest of Canada included building new branches and several mergers with other banks.

RBC corporate headquarters are in the Royal Bank Plaza, 200 Bay Street, Toronto. At the same time, its head office is in Place Ville-Marie, at University Street and René-Lévesque Boulevard in Montreal. It is one of the global systemically important banks. RBC is a Canadian bank, but its subsidiaries in the US and Caribbean countries offer personal banking services.

RBC Capital Markets is its investment, and corporate banking subsidiary and RBC Dominion Securities is its brokerage. RBC has more than $1 trillion in assets under management. In 1998, RBC tried unsuccessfully to merge with the Bank of Montreal.

RBC branch

RBC’s modern corporate headquarters building in Toronto's financial district.

RBC boasts of more than 92,000 employees and 17 million clients. At the same time, it has been criticized for being the world's fifth largest fossil fuel financier and the largest financier of fossil fuel development in Canada.

RBC's fiscal year ends in July, so its third quarter is Feb-Apr. Over the third quarter of 2022, RBC achieved a net income of $3,577 million. This included Personal & Commercial Banking net income of $2,023 million, accounting for 56% of the bank's income. Over this period, the deteriorating macroeconomic environment made the bank put money aside for possible credit losses (the possibility that some advanced loans likely would not be paid back). This provision was the main factor in lowering the bank's earnings.

Capital Markets Net income was $479 million, amounting to 13% of the quarterly income. This is sharply reduced relative to the prior periods due to loan underwriting markdowns, lower debt and equity origination and lower loan syndication.

Toronto-Dominion Bank (TD)

Toronto-Dominion Bank (TD)

As of 8 September 2022

td logo
ExchangeTSX, NYSE
Ticker SymbolTD
50 Day Avg Vol.5,714,507
Number of Shares1,813,100,000
Dividend Growth (5 Year)7.47%/year
Return on Equity15.20%
Return on Assets0.81%

TD stock has performed exceptionally well over recent history as its annualized 15-year return is 3.9 times the return of the TSX index. TD Bank Group is a diversified Canadian financial services company. It was created in 1955 from the merger of the Bank of Toronto (founded in 1855) and the Dominion Bank (founded in 1869). TD is Canada’s largest bank by assets under management and a systemically important bank. After the acquisition of Canada Trust in 1996, TD Canada Trust became the brand used by TD for commercial banking in Canada. TD Bank NA is its subsidiary doing business in the US.

In 1998, TD tried unsuccessfully to merge with CIBC. In 2005, TD entered into US retail banking by spending US$3.8 Billion and acquiring Banknorth, which was a New England bank. In 2006, TD sold its US brokerage business to Ameritrade. In 2007, TD acquired Commerce Bancorp (another US bank). In 2010, TD acquired Riverside National Bank and the South Financial Group.

In 2011, TD acquired Chrysler financial services and MBNA’s Canadian credit card business.

TD was the only big Canadian bank which kept its Aaa credit rating through the great recession (2007-2009). In February 2022, TD announced that it would acquire First Horizon Bank for $25 per share for a total of $13.4 billion. This is the second largest US bank deal after the great recession and is expected to close on February 2023. First Horizon has 1,560 branches in 22 states, and its acquisition represents a big push by TD into the US market.

Image of TD Tower

Toronto-Dominion Bank Tower (TD Tower), Toronto, Ontario, Canada

Also, TD sold 1.5% of Charles Schwab Corporation very recently and declared its plan to buy the US brokerage firm Cowen for US$1.3 billion ($39 per share). The Cowan transaction is expected to close in late 2022 or early 2023 and expands TD’s wholesale banking business.

TD also has more than its fair share of controversy; this includes forcing a customer to refinance their mortgage in 60 days or face foreclosure. Its advisors also encourage customers to make inappropriate investments and increase their credit limit without their consent.

TDs fiscal year starts on November 1, so its third quarter is May-July. TD announced a net income of $3,214 million over the third quarter of 2022. Income is reduced because of $678 million lost on interest rate hedges over the quarter. These hedges are in place to prevent an increase in First Horizon acquisition cost between commitment and closing. They are likely to boost TD’s income over the fourth quarter. Adjusted earnings over the quarter were $3.8 billion.

Net income from retail banking in Canada was $2,253 million, comprising nearly 60% of the group's adjusted net earnings. Income from retail banking in the US was $1,442 million comprising 38% of adjusted net income. Total assets were $1.8 trillion, mainly arising from $1.2 trillion of deposits.

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Bank of Nova Scotia (Scotiabank)

Bank of Nova Scotia (Scotiabank)

As of 8 September 2022

scotiabank logo
ExchangeTSX, NYSE
Ticker SymbolBNS
50 Day Avg Vol.4,264,207
Number of Shares1,192,209,000
Dividend Growth (5 Year)4.30%/year
Return on Equity15.59%
Return on Assets0.82%

Bank of Nova Scotia stock (BNS stock) has not performed particularly well over the recent history compared with other large Canadian banks. Yet, its annualized 15-year return is 2.6 times the return of the TSX index. Scotiabank is a diversified Canadian financial services company headquartered in Toronto. Scotiabank offers personal and commercial banking, wealth management, and corporate and investment banking to 25 million customers worldwide. Scotiabank was established in Halifax in 1832 and relocated to Toronto in 1900.

Scotiabank is one of 15 institutions participating in London gold price fixing. The bank expanded by opening branches in Canada, the US and the Caribbean until the Bank of New Brunswick was acquired in 1913 and Metropolitan Bank in 1914. In 1919, the bank amalgamated with the Bank of Ottawa.

In 1975, the Bank of Nova Scotia adopted Scotiabank as its brand name. Scotiabank is the first Canadian bank which got a licence for trading in Yuan. Scotiabank owns Thanachart Bank, which is the 6th largest bank in Thailand.

Historic Beaux-Arts headquarters BNS

Historic Beaux-Arts headquarters of Bank of Nova Scotia (Scotiabank, 1951, architects Mathers and Haldenby) are located at 44 King Street West. TORONTO, CANADA

In 2012, Scotiabank acquired ING Direct Bank of Canada for $3.13 billion and later renamed it Tangerine. In 2015, the Bank of Nova Scotia bought Citigroup’s retail banking in Panama and Costa Rica. In 2019, Scotia sold its branches in Puerto Rico and the US Virgin Islands.

The main lines of business for Scotiabank are:

  1. Canadian Banking,
  2. International Banking,
  3. Global Wealth and Insurance (GWI) and
  4. Global Banking and Markets.

The bank's fiscal year starts on November 1. The last available results relate to Q3 2022, which relates to May-July. Over Q3 net income was $2,594 million. Reported net income attributable to shareholders for each of the business lines of Canadian Banking, International Banking, Global Wealth Management and Global Banking and Markets were respectively $1,213, $625, $376 and $378 million. Total income attributable to equity holders was $2,540 million. Thus the contribution from the business lines of Canadian Banking, International Banking, Global Wealth Management and Global Banking and Markets were respectively 48%, 25%, 15% and 15%.

Bank of Montreal (BMO)

Bank of Montreal (BMO)

As of 8 September 2022

bmo logo
ExchangeTSX, NYSE
Ticker SymbolBMO
50 Day Avg Vol.2,349,488
Number of Shares674,361,486
Dividend Growth (5 Year)6.77%/year
Return on Equity18.69%
Return on Assets1.08%

Bank of Montreal stock (BMO stock) has performed particularly well over recent history compared with Canada’s TSX index. Its annualized 15-year return is 3.3 times the return of the TSX index. A group of merchants founded Montreal Bank in Montreal in 1817. Operational headquarters and executive offices moved to Toronto in 1977. It is one of the eight largest banks in North America. As the oldest Canadian bank, it had the institution number 001.

In Canada, it does business as BMO Bank of Montreal, while in the US, it does business as BMO Financial Group (which includes the BMO Harris Bank). Its investment and corporate banking division is called BMO Capital Markets. Its wealth management division is branded BMO Nesbitt Burns.

BMO has earned a place in the list of best dividend stocks for not missing any dividend payments since 1829. BMO Financial Group is acquiring Bank of The West from BNP Paribas for US$16.3 billion. BNP Paribas is the second largest bank in Europe after HSBC. It plans to merge Bank of the West with BMO Harris Bank and double its presence in the US market.

bmo main branch

Bank of Montreal Main Branch - a Pantheon-like building located on Place d'Armes in Old Montreal. This building is the centrepiece of BMO’s headquarters. Bank of Montreal is the oldest bank in Canada, founded in 1817. Montreal, Canada.

In 1822, Montreal Bank changed its name to Bank of Montreal and went public. In 1824, BMO was expelled from the Ontario market, but it returned in 1838 by purchasing the Bank of the People. The operational headquarters of the bank moved to the First Canadian Place on Bay Street in Toronto in 1977 due to political instability in Quebec.

Harris Bank was acquired in 1984 and later rebranded as BMO Harris Bank. In 1987, BMO acquired the stock brokerage Nesbitt, Thomson and Company. BMO was listed on NYSE in 1995. In 1998, the Bank of Montreal and Royal Bank of Canada agreed to merge, but the regulator blocked this merger. In 2000, BMO and RBC joined their merchant payment processor businesses and formed Moneris Solutions.

BMO purchased AIG Life Insurance Company of Canada for $330 million and renamed it BMO Life Assurance Company in 2009. BMO incorporated its subsidiary BMO ChinaCo in China in 2010. BMO acquired Foreign & Colonial Investment Trust and called it BMO Commercial Property Trust in 2019. In 2015, BMO acquired GE Capital's transportation-finance unit.

BMO consists of three divisions:

  1. Personal and Commercial Client Group, which includes BMO Bank of Montreal and BMO Harris Bank.
  2. Investment Banking Group (BMO Capital Markets)
  3. Wealth Management which includes BMO Nesbitt Burns (offers full-service investment in Canada), BMO InvestorLine (self-service investment in Canada), BMO Harris Investor Services (advisory service in the US), BMO Private Banking which includes Harris myCFO and Cedar Street Advisors.

BMO’s fiscal year starts in November. Thus the third quarter is related to the period May-July. BMO’s Q3 2022 net income was $1,365 million.

Canadian Imperial Bank of Commerce (CIBC)

Canadian Imperial Bank
of Commerce (CIBC)

As of 8 September 2022

cibc logo
ExchangeTSX, NYSE
Ticker SymbolCM
50 Day Avg Vol.3,022,993
Number of Shares904,691,173
Dividend Growth (5 Year)3.74%/year
Return on Equity14.84%
Return on Assets0.74%

CIBC stock has been a laggard compared with other Canadian bank stocks, as it has the least return compared with other large Canadian banks; for example, TD stock's 15-year return is 1.7 times its return. But even the laggard bank stock returned 2.3 times the TSX index.

The Canadian Imperial Bank of Commerce is a large, diversified financial services company headquartered at CIBC square in Toronto. It was formed in 1961 from a merger between the Canadian Bank of Commerce and the Imperial Bank of Canada. The Canadian Bank of Commerce was established in 1867, and the Imperial Bank of Canada was incorporated in 1873.

The main lines of business in CIBC are:

  1. Canadian personal and business banking,
  2. Canadian Commercial Banking and Wealth Management,
  3. US Commercial Banking and Wealth Management, and
  4. Capital Markets.

CIBC operates in the US, the Caribbean, Asia and the UK. When CIBC was formed in 1961 with 1200 branches, it was the largest Canadian bank. In the 1960s, CIBC installed Canada's first 24-hour cash dispenser (the predecessor to ATM). In 1987, changes to Canadian banking regulations allowed Canadian banks to engage in investment dealerships, insurance and other financial services.

In 1988, CIBC acquired most of Wood Gundy, a reputable underwriter. Later it was merged with CIBC securities to make up CIBC Wood Gundy. It became CIBC Oppenheimer in 1997 and later CIBC World Markets.

In 1998, CIBC and Loblaws created President’s Choice (PC) Financial. This collaboration ended in 2017. As a result, CIBC established a direct bank called Simplii Financial. All financial assets of PC Financial were transferred to Simplii Financial, a CIBC subsidiary.

CIBC planned a merger with Toronto-Dominion bank in 1998. This merger was blocked by Prime Minister Paul Martin, who was the minister of finance at the time. CIBC bought Juniper Financial Corporation in 2001 and sold it to Barclays Bank in 2004. In 2001, Barclays and CIBC combined their Caribbean operations into FirstCaribbean International Bank. In 2006, CIBC bought Barclay's stake and became 92% owner of FirstCaribbean International Bank. In 2011, CIBC rebranded its subsidiary FirstCaribbean International Bank as CIBC FirstCaribbean International Bank.

In 2017, CIBC bought PrivateBancorp for US$3.8 billion and rebranded it as CIBC Bank USA. It has operations in 13 states and is concentrated on the east coast. Occasionally quarrels among members of CIBC management have become public.

CIBC employees have successfully sued CIBC for not paying for their overtime work in contravention of the Canada Labour code. In 2003, the Securities and exchange commission handed an $80 million fine to CIBC for its role in the manipulation of Enron statements. Concerning the Enron case, the SEC also sued three CIBC executives. In 2005, CIBC paid US$2.4 billion to settle a class action suit by a group of pension funds and investment managers related to the Enron collapse.

In 2005, CIBC agreed to pay US$125 million to settle an SEC investigation into illegal actions by CIBC in which CIBC boosted its profits at the expense of long-term mutual fund investors.

National Bank of Canada

National Bank of Canada

As of 8 September 2022

national bank logo
ExchangeTSX, NYSE
Ticker SymbolNA
50 Day Avg Vol.1,210,972
Number of Shares336,457,021
Dividend Growth (5 Year)6.08%/year
Return on Equity19.53%
Return on Assets0.95%

National Bank of Canada is headquartered in Montreal, with branches in most provinces. Banque Nationale was created by an act of Quebec’s provincial legislature and was initially founded and controlled by francophones.

During the great depression, Banque Nationale was merged with Banque d’Hochelaga and Banque Canadienne Nationale (BCN) was formed. BCN was behind the first Canadian credit card called Chargex.

During the 1970s, the Provincial Bank of Canada, which was BCN’s rival, expanded by merging with the People’s Bank, the Unity Bank of Canada and the Laurentide Financial Corporation. In 1979, the Canadian National Bank and the Provincial Bank of Canada merged and formed the National Bank of Canada (NA). During the 1980s, it bought two brokerage firms of Lévesque Beaubien and Geoffrion Leclerc.

Since 1994, NA has had branches in the US. In 1999, NA bought the brokerage firm First Marathon and merged it with its subsidiary Lévesque Beaubien Geoffrion Inc to form the National Bank Financial (NBF), its investment banking subsidiary. Putnam Lovell was another investment bank that NA acquired and merged with NBF in 2002.

Later in the 2010s, NA acquired the ABA Bank of Cambodia. National Bank operations are still concentrated mainly in Quebec.

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