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Wondering which Canadian bank stands out as the best? Let’s explore the Big 6, evaluating them from least to most impressive to guide you in determining which ones could enhance your portfolio—or which may be holding you back.
Whether you’re an existing shareholder or newly exploring Canadian financials, this guide examines each bank’s strengths, weaknesses, and long-term growth prospects.
From underachievers to leaders in the field—here’s the rundown on the good, the bad, and the mundane.
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Ranking Canada’s Big 6 Banks
Scotiabank (BNS)
– Bear Case: Significant international exposure brings volatility, and the absence of a dividend increase in 2024 serves as a subtler cut. With the highest payout ratio among peers, it falls short across key measures.
– Mike’s Take: There are better opportunities available. Without a notable turnaround, your capital could earn more elsewhere.
CIBC (CM)
– Bull Case: Stable performance in Canada, grounded in robust retail and commercial banking. Expectations for 2024 point to a strong year ahead.
– Bear Case: Potential for limited growth due to heavy reliance on the Canadian market and a considerable portion of uninsured mortgages.
– Mike’s Take: A reasonable choice, but other banks may offer more substantial returns.
TD Bank (TD)
– Bull Case: Boasts a strong capital foundation and considerable U.S. presence, providing ample expansion opportunities. Also benefits from a robust asset recycling strategy.
– Bear Case: Currently under scrutiny for a money-laundering investigation in the U.S., which could stifle growth and escalate regulatory pressures.
– Mike’s Take: Think of it as a premium dividend bond—steady yield with modest growth potential. However, risks have led it down the rankings.
Bank of Montreal (BMO)
– Bull Case: A strategic growth candidate with a solid footprint in the U.S. and a strong focus on private banking.
– Bear Case: The recent acquisition of Bank of the West raises concerns over volatility and integration challenges.
– Mike’s Take: BMO is benefiting from TD’s missteps and presents significant growth possibilities—definitely worth a look.
National Bank (NA)
– Bull Case: This Quebec-based institution excels in its niche. Strong capital markets, strategic acquisitions (like Canadian Western Bank), and consistent long-term performance.
– Bear Case: Still the smallest player among the Big 6 and heavily intertwined with Quebec’s economy, making it more susceptible to regional downturns.
– Mike’s Take: Continues to be one of my preferred holdings, though short-term macro factors place it just behind the front-runner.
Royal Bank of Canada (RY)
– Bull Case: Unmatched in diversity—covering personal banking, wealth management, insurance, and capital markets. A bastion of stability and a model for dividend growth.
– Bear Case: Its extensive mortgage portfolio ties it closely to the Canadian real estate sector.
– Mike’s Take: The benchmark in Canadian banking. Dependable, diversified, and a steady dividend grower—currently my top choice.
Final Thoughts
– You don’t have to “catch them all.” Selecting the top two banks that best fit your strategy and risk appetite is more wise than owning all six.
– Expand your financial portfolio by considering other strong contenders like EQ Bank, GoEasy, Propel Holdings, TMX Group, Brookfield, Intact Financial, and insurance leaders such as Manulife, Sun Life, and Great-West.
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Extra Resources
🎧 Catch the full earnings review of Canada’s leading six banks, along with insights on EQ Bank and GoEasy, in our latest video breakdown.
🛡️ Worried about economic instability? Discover how to “Trump-Proof” your portfolio by tuning into our special podcast episode!
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