Updated on January 13th, 2025 by Bob Ciura
The largest Canadian bank stocks have proven over the past decade that they not only endure recessions, but that they can grow at high rates coming out of a recession as well.
Canadian bank stocks also pay higher dividends than many U.S. bank stocks, making them potentially more appealing for income investors.
Valuations have also remained quite low recently, boosting their respective total return profiles as a result.
In this article, we’ll take a look at the “Big 5” Canadian banks – Canadian Imperial Bank of Commerce (CM), Royal Bank of Canada (RY), The Bank of Nova Scotia (BNS), Bank of Montreal (BMO) and Toronto-Dominion Bank (TD) – and rank them in order of highest expected returns.
Note: Canada imposes a 15% dividend withholding tax on U.S. investors. In many cases, investing in Canadian stocks through a U.S. retirement account waives the dividend withholding tax from Canada, but check with your tax preparer or accountant for more on this issue.
The top 5 big banks in Canada are very shareholder-friendly, with attractive cash returns. With this in mind, we created a full list of financial stocks.
You can download the entire list of 245 financial sector stocks (along with important financial metrics like dividend yields and price-to-earnings ratios) by clicking the link below:
More information can be found in the Sure Analysis Research Database, which ranks stocks based on their dividend yield, earnings-per-share growth potential, and changes in the valuation multiple.
The stocks are listed in order below, with #1 being the most attractive for investors today.
Read on to see which Canadian bank is ranked highest in our Sure Analysis Research Database.
Table Of Contents
You can use the following table of contents to instantly jump to a specific stock:
- Canadian Bank Stock #5: Canadian Imperial Bank of Commerce (CM)
- Canadian Bank Stock #4: Royal Bank of Canada (RY)
- Canadian Bank Stock #3: Bank of Montreal (BMO)
- Canadian Bank Stock #2: Bank of Nova Scotia (BNS)
- Canadian Bank Stock #1: Toronto-Dominion Bank (TD)
The top 5 Canadian bank stocks are ranked based on total expected returns over the next five years, from lowest to highest.
Canadian Bank Stock #5: Canadian Imperial Bank of Commerce (CM)
- 5-year expected returns: 6.4%
Canadian Imperial Bank of Commerce is a global financial institution that provides banking and other financial services to individuals, small businesses, corporations, and institutional clients. CIBC was founded in 1961 and is headquartered in Toronto, Canada.
In addition to trading on the New York Stock Exchange, CM stock trades on the Toronto Stock Exchange, as do the other stocks in this article.
You can download a full list of all TSX 60 stocks below:
CIBC reported its fiscal Q4 and full-year 2024 earnings results on 12/05/24. For the quarter, the bank’s revenue climbed 13% year over year (“YOY”) to C$6.6 billion. Provision for credit losses (“PCL”) was C$419 million, down 23% from a year ago.
Naturally, the loan loss ratio was 0.30%, down from 0.35% a year ago. And net income came in C$1.9 billion (up 27%). Adjusted net income came in 24% higher at C$1.9 billion.
Ultimately, adjusted earnings per share (“EPS”) rose 22% to C$1.91. The adjusted return on equity was 13.4%, down from 14.0% a year ago.
The bank’s capital position remains solid with a Common Equity Tier 1 ratio of 13.3%, same as a year ago. CIBC raised its quarterly dividend by 7.8% to C$0.97 per share, equating an annual payout of $3.88 per share.
Click here to download our most recent Sure Analysis report on CM (preview of page 1 of 3 shown below):
Canadian Bank Stock #4: Royal Bank of Canada (RY)
- 5-year expected returns: 8.0%
The Royal Bank of Canada is the largest bank in Canada by market capitalization, and by total assets. RBC offers banking and financial services to customers primarily in Canada and the U.S.
The financial institution operates in four core business units: Personal & Commercial Banking (39% of FY2023 revenue), Wealth Management (31%), Insurance (10%), and Capital Markets (20%). Its revenue mix is roughly 59% Canada, 25% the U.S., and 16% international.
On 12/04/24, RBC reported solid fiscal Q4 and full-year 2024 earnings results. Compared to the prior year’s quarter, the bank reported revenue growth of 19% to C$15.1 billion. Management put aside a reserve of C$840 million in the form of provision for credit losses (“PCL”) that dragged down net income. The PCL was 17% higher than a year ago.
Additionally, non-interest expense rose 12% to $9.0 billion. Net income rose 7.2% year over year (“YOY”) to C$4.2 billion; on a per share basis, it rose 5.4% to C$2.91.
Adjusted net income was 18% higher at C$4.4 billion, and its adjusted diluted earnings-per-share (“EPS”) was C$3.07 (up 16%). The bank’s capital position was still solid with a Common Equity Tier 1 ratio at 13.2%, down from 14.5% a year ago.
The bank raised its quarterly dividend by 4.2% to C$1.48 per share, equating to an annualized payout of C$5.92 per share.
Click here to download our most recent Sure Analysis report on RY (preview of page 1 of 3 shown below):
Canadian Bank Stock #3: Bank of Montreal (BMO)
- 5-year expected annual returns: 8.2%
Bank of Montreal was formed in 1817, becoming Canada’s first bank. The past two centuries have seen Bank of Montreal grow into a global powerhouse of financial services and today, it has about 2,000 branches (including Bank of the West branches) in North America.
It generates about 45% of earnings from the U.S. (including Bank of the West) and the rest primarily from Canada. Bank of Montreal generates about 64% of its adjusted revenue from Canada and about 36% from the U.S.
Bank of Montreal reported its fiscal Q4 and full-year 2024 financial results on 12/05/24. For the quarter, compared to a year ago, revenue rose 7.7% to C$9.0 billion, while net income climbed 35% to C$2.3 billion and diluted earnings per share (“EPS”) rose 34% to C$2.94.
This jump in earnings was primarily due to the reversal of a fiscal 2022 legal provision related to a lawsuit associated with a predecessor bank.
Adjusted net income fell 31% to C$1.5 billion and adjusted diluted EPS fell 35% to C$1.90. Higher adjusted provision for credit losses (“PCL”) of C$1.5 billion (versus C$446 million a year ago) weighed on earnings.
Click here to download our most recent Sure Analysis report on BMO (preview of page 1 of 3 shown below):
Canadian Bank Stock #2: Bank of Nova Scotia (BNS)
- 5-year expected annual returns: 10.9%
Bank of Nova Scotia (often called Scotiabank) is the fourth-largest financial institution in Canada behind the Royal Bank of Canada, the Toronto-Dominion Bank and Bank of Montreal.
Scotiabank reports in four core business segments – Canadian Banking, International Banking, Global Wealth Management, and Global Banking & Markets.
Scotiabank reported fiscal Q4 and full-year 2024 results on 12/03/24. For the quarter, revenue rose 3.1% to C$8.5 billion, while non-interest expenses fell 4.2% to C$5.3 billion. Provision for credit losses (“PCL”) declined by 18% year over year (“YOY”) to C$1.0 billion, weighing less on earnings compared to a year ago.
As a result, net income rose 25% to C$1.7 billion and diluted earnings per share (“EPS”) rose 23% to C$1.22. The bank’s PCL as a percentage of average net loans & acceptances was 0.54%, down from 0.65% a year ago, whereas the PCL on impaired loans as a percentage of average net loans & acceptances was 0.55%, up from 0.42% a year ago.
The fiscal year saw revenue rising 4.5% to C$33.7 billion. Non-interest expenses increased by 3.0% to C$19.7 billion, while PCL rose 18% to C$4.1 billion.
The PCL as a percentage of average net loans & acceptances was 0.53%, up from 0.44% a year ago, whereas the PCL on impaired loans as a percentage of average net loans & acceptances was 0.46%, up from 0.32% a year ago.
Click here to download our most recent Sure Analysis report on BNS (preview of page 1 of 3 shown below):
Canadian Bank Stock #1: Toronto-Dominion Bank (TD)
- 5-year expected annual returns: 12.2%
Toronto-Dominion Bank traces its lineage back to 1855 when the Bank of Toronto was founded. It is now a major bank with C$1.9 trillion in assets. The bank produces about C$14 billion in annual net income each year.
TD reported fiscal Q4 and full-year 2024 earnings results on December 5th, 2024. For the quarter, TD reported revenue growth of 18% year-over-year to C$15.5 billion. Provision for credit losses (“PCL”) rose 26% to C$1.1 billion.
However, net income still climbed 27% to C$3.6 billion. The adjusted metrics likely provide a better picture of TD’s normal earnings power.
The adjusted revenue climbed 12% to C$14.9 billion, and the adjusted net income fell 8% to C$3.2 billion, leading to adjusted diluted earnings per share (“EPS”) of C$1.72, down 5.5% year over year. Its PCL ratio as a percentage of average net loans and acceptances was 0.47%, up 8 basis points from a year ago.
The adjusted return on equity (“ROE”) was 13.4%, up from 10.5% a year ago. The bank’s capital position remained solid with a common equity tier 1 ratio of 13.1%, down from 14.4% a year ago.
Click here to download our most recent Sure Analysis report on TD (preview of page 1 of 3 shown below):
Final Thoughts
Canadian bank stocks do not get nearly as much coverage as the major U.S. banks. However, income and value investors should pay attention to the big 5 Canadian bank stocks.
Royal Bank of Canada, TD Bank, Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank of Commerce are all highly profitable banks.
And, all 5 have reasonable valuations with dividend yields that are well above the U.S. bank stocks.
The following articles contain stocks with very long dividend or corporate histories, ripe for selection for dividend growth investors:
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500. - The Best DRIP Stocks: The top 15 Dividend Aristocrats with no-fee dividend reinvestment plans.
- The Complete List of Russell 2000 Stocks
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