When it comes to investment banking, there are many financial institutions and companies in Canada to choose from, and it can take time to determine which is the best option, even when looking at key indicators like strong balance sheets. That said, let’s take a look at some of the best Canadian banking stocks to invest in in 2026.
What are the Best Stocks to Choose From for 2026?
When it comes to choosing the most attractive Canadian bank stocks, it might not be much of a surprise that the top Canadian bank stock picks are some of the most notable banks in the Canadian banking system. These are Canada’s top 6 banks. Not only do they have retail banking spaces that some smaller banks don’t have, but they also have more robust growth prospects.
The stocks mentioned below also offer solid dividend yields and are a great choice for diversified investment portfolios. Many of these top stocks are also offered at very favourable prices, and don’t cost much more than the smaller banks. From a value standpoint, they’re a great investment, since banks will always be an important part of the Canadian economy.
Royal Bank of Canada (TSE: RY)
RBC is one of Canada’s largest banks and is considered to be one of Canada’s top 6 banks. They serve over 19 million customers and have over 100,000 employees worldwide. They offer key segments like bank accounts, credit cards, auto financing, mortgages, loans, investment products, and investment services. They even offer global banking services, global wealth management and home equity financing.
One of the reasons that the RBC stock is so popular among investors is that it’s established as a dividend growth stock. Plus, their earnings more than cover their dividend payouts. This is impressive, considering the last few years have been really difficult for bank stocks.
Even though they’re so large, RBC still has significant growth potential, as many Canadian banks continue to expand. Even after so many years in business, Royal Bank continues to grow its market value and deliver revenue growth to long-term investors. With that in mind, here are the specifics of RBC stocks.
The Royal Bank of Canada has a stock price of around $287.63 with a yearly range of $201.76 – $306.38. They have a market capitalization of 397.36 B Canadian and a P/E ratio of 18.13. Their yearly dividend yield is 2.45%.
Toronto Dominion Bank (TSE: TD)
TD Bank is another one of Canada’s systemically important banks. They were created in 1955 and are headquartered in Toronto. They were created through a merger of The Dominion Bank, founded in 1869, and the Bank of Toronto, founded in 1855.
TD is considered a top-10 bank in North America and the 23rd-largest bank in the world due to its strong international presence. While they do serve the world, they also have TD Canada Trust, the bank’s Canadian division.
This division has over 1,095 branches and serves over 11 million people. They offer a range of financial services, including wholesale and private banking, as well as financial products and financing options.
The TD stock price currently stands at around $177.49 per share. They have a market cap of 290.88B Canadian, and their P/E ratio is 19.04. The dividend yield is 2.52%, which is good by dividend standards.
Bank of Montreal (TSE: BMO)
The Bank of Montreal, also known as BMO, was founded in 1817 and is Canada’s oldest bank and one of its top 6 banks. They’re a prominent lender known for delivering robust growth during the same period as other banks.
They offer a range of services, including chequing and savings accounts, investments, loans, mortgages, indirect lending, and more. Currently, they have over 13 million customers, over 900 branches in Canada, and over $1.29 trillion in total assets. With that in mind, this is what their stock looks like:
- Around $245.31 per share
- Yearly range of $168.92 – $259.20
- Market Capitalization of 165.85B Canadian
- P/E ratio of 19.99
- Dividend yield of 2.79%
Bank of Nova Scotia (TSE: BNS)
The Bank of Nova Scotia, also known as Scotiabank, is one of Canada’s top 6 banks and is headquartered in Toronto, Ontario. Technically, based on deposits and market capitalization, it’s considered the third-largest bank in Canada, partly due to the company’s exposure to Latin America.
They offer services including loans, lines of credit, credit cards, chequing accounts, savings accounts, mortgages, self-directed investing, mutual funds, and more. They even have investment advisory services.
Here is the information regarding their stocks.
- The share cost is around $133.24
- The yearly range is $91.01 to $134.50
- Market Cap is 162.31B Canadian
- P/E ratio is 17.39
- Dividend yield is 3.42%
Canadian Imperial Bank of Commerce (TSE: CM)
Another member of Canada’s top 6 banks is the Canadian Imperial Bank of Commerce, also known as CIBC. They’re also headquartered in Toronto, Ontario. They offer personal banking, credit cards, loans, lines of credit, mortgages, investments and US cross-border banking. They were also ranked #1 for small business banking by J.D. Power in 2023 and 2024.
The specifics of CIBC’s stock include the following:
- The stock price is around $165.81
- A yearly range of $114.80 – $172.87
- A market cap of 150.78B Canadian
- P/E ratio of 15.92
- Dividend yield of 2.58%
Canadian Bank Stock ETFs
When it comes to investing in Canadian banks, stocks aren’t the only option available to you. Another way to invest is through ETFs. What exactly are ETFs, though? Well, ETFs, also known as Exchange-Traded Funds, are a type of investment fund. Essentially, they track a basket of securities, typically comprising stocks, bonds, currencies, debt instruments, futures contracts, and/or commodities.
They’re similar to mutual funds in the sense that they allow you to invest in an already assembled portfolio of securities. Here are some of the best Canadian bank ETFs to invest in.
BMO Equal Weight Banks Index ETF (ZEB)
This ETF has been around since October 2009. Even though it’s been around for a while, it has always generally performed well. This specific index aims to replicate the performance of the Solactive Equal Weight Canada Banks Index, net of expenses. The nice thing about this ETF is that each security has equal weight rather than market-cap weight.
BMO Covered Call Canadian Banks ETF(ZWB)
This type of ETF is considered to be a medium investment risk. Many Canadian investors choose to purchase this fund because it helps diversify their portfolios, and it invests in Canadian bank stocks, including those of RBC, TD, and Scotiabank. It focuses on monthly cash flow while having the potential for capital gains. Its main objective is to provide a return at least comparable to that of at least one ETF while mitigating downside risk.
These are just some of the many reasons why this is a popular investment choice.
RBC Quant Canadian Bank Leaders (RCD)
This index seeks to replicate the performance of a Canadian bank stocks portfolio. It is currently seeking to track the Solactive Canada Bank Yield Index. The reason that it appeals so much to investors is that it is ideal for tax-efficient income. It’s also a much simpler way to invest in Canadian banks and makes sense since they have a history of high dividend growth.
iShares Canadian Financial Monthly Income ETF (FIE)
There are many reasons that investors choose to invest in this EFT. It earns monthly dividend income, it’s a diversified portfolio of the Canadian financial sector, and it seeks to maximize returns and provide a stable stream of monthly cash distributions. It’s also available for registered plans.
Horizons Big Banks Index ETF (HBG)
This ETF is one of the top ETFs for Canadian banks. Like many of the other ETFs that we’ve discussed, this ETF offers exposure to a diversified portfolio of shares for Canada’s top banks. The difference between this ETF and the others is that this ETF focuses on the major players in the banking sector.
What are the Big Six Canadian Banks?
The Big Six banks in Canada dominate the financial sector. They are:
- The Royal Bank of Canada (RBC)
- Toronto-Dominion Bank (TD Bank)
- Bank of Montreal (BMO)
- The Bank of Nova Scotia (Scotiabank)
- Canadian Imperial Bank of Commerce (CIBC)
- National Bank of Canada (NBC)
How to Purchase Canadian Bank Stocks Online
It’s a pretty simple process to purchase Canadian bank stocks online. The first thing you need to do is choose the online brokerage you wish to use. This includes:
- Wealthsimple
- National Bank Direct Brokerage
- RBC Direct Investing
- Scotiabank iTRADE
- BMO Investorline
Once you’ve chosen the brokerage, you need to select the account type in which you want to hold your shares. Two common account choices are Tax-Free Savings Accounts and Registered Retirement Savings Plans. From here, you just need to wait for verification, which can take anywhere from a few minutes to a few hours.
Should Bank Stocks Be Held in a TFSA or RRSP?
Both TFSAs and RRSPs are great tax-advantage account options for bank stocks. That said, the best option for you depends on your current tax bracket, withdrawal plans, and income needs.
With a TFSA, there’s no upfront tax deduction, and all of your interest income and dividends are tax-free. While there is limited contribution room, you can withdraw at any time, tax-free. Any amounts that you withdraw will be returned to your contribution room the following year.
RRSPs, on the other hand, reduce your taxable income. All of your contributions are tax-deferred and are taxed when the funds are withdrawn. Any withdrawals you make before you retire incur a withholding tax. Any withdrawal amounts that you make don’t get returned to your contribution room.
How Canadian Dividends Compare to US Banks
Compared with US banks, Canadian banks pay much higher dividends. While Canadian banks can have dividends around 2.5%, they’re usually sitting around 4%-4.5%. US banks hover between 2% to 2.8%.
The Financial Ratios That Matter the Most When Valuing Bank Stocks
When you’re valuing bank stocks, there are plenty of financial ratios that you need to consider. These are:
- Price-to-Book Ratio: This value compares the share price to book value per share.
- Price-to-Earnings Ratio: This ratio measures a share’s price relative to earnings per share.
- Return on Equity: This metric measures how much net income is generated relative to shareholders’ equity.
- Net Interest Margin: This value measures the difference between interest earned and interest paid, divided by interest-earning assets.
- Efficiency Ratio: This is the ratio of non-interest expenses to total revenue.
- Non-Performing Loans Ratio: This measures the share of loans for which borrowers have stopped making regular payments, alongside provisions for potential defaults.
- Tier 1 Capital Ratio: This ratio measures high-quality capital relative to risk-weighted assets.
How Bank of Canada Rate Cuts Impact Bank Earnings
Since the Bank of Canada Rate impacts the prime rate, cutting that rate directly impacts a bank’s earnings. When the prime rate drops, already existing lending products are directly impacted, including variable-rate mortgages and lines of credit. It also directly affects commercial lending.
When the rate falls, paid dividends will be impacted, but banks can’t always adjust as quickly as the rate falls. This can cause banks to lose even more money.
That said, lower borrowing costs can increase demand for loans. This can help offset some of the loss. They also make up for the loss because families can afford more, which means default rates and non-performing loan numbers drop. These rates can also boost wealth management and insurance activities, increasing fee-based revenue and helping replace some of the revenue lost from the previous high interest rates.
Are Smaller Bank Stocks Worth Considering?
If you’re looking at investing in dividend stocks, there are many direct stock purchase plans you can acquire through different banks to diversify your portfolio. Income investors like to add diversified banks to help manage their risk tolerance and increase their income.
Some smaller banks that can be found on the Toronto Stock Exchange include:
- Laurentian Bank of Canada (until November 1, 2026)
- Equitable Bank
- VersaBank
However, just because investors invest in banks does not mean they aren’t investing in anything else. In fact, many investors invest in a wide variety of stocks and funds that track indexes, including the S&P/TSX Composite Index and the S&P/TSX 60.
Why Do They Consider Canadian Bank Stocks to be Blue-Chip Investments?
Even with interest-rate sensitivity, Canadian bank stocks are considered blue-chip investments for multiple reasons.
- Since the Big Six banks dominate Canadian commercial banking, they are considered stable. Strict federal regulations also limit heavy foreign competition.
- Since these institutions have operated in Canada for over a century, they have a long record of paying dividends on time, and each bank has a history of increasing its dividends. They also have credit loss provisions in place to help stabilize their income.
- Even with impaired loans, their strong commitment to credit quality has somewhat stabilized their book value, compound annual growth rate, and 5-year return rate.
- Their focus on strategic acquisitions and business models helps maintain their current valuations through steady income streams.
- They also have strong balance sheets, which allow them to have substantial capital reserves and absorb economic stress.
Should You Purchase Bank Shares Through Your Bank’s Own Brokerage?
When you’re purchasing bank shares, you need to consider a lot of things, including the management expense ratio. While purchasing bank shares through your bank’s own brokerage is simple and seamless, it can also be more expensive and limit your choices.
How Do Canadian Banks Make Money?
Canadian banks earn their adjusted net income through net interest income and non-interest income. Net interest income is the difference between the interest that banks earn on loans and investments and the interest that they pay out to customers. This accounts for around half of a bank’s total revenue.
Non-interest income, on the other hand, is revenue that’s earned from sources outside of interest. This includes:
- Monthly account fees
- Overdraft fees
- ATM fees
- Wire transfer charges
- Commission
- Asset management fees
- Mutual fund fees
- Foreign exchange transactions
- Merchant processing fees
- Annual card fees
What are the Dividend Track Records and Payout Ratios for the Big Six Banks?
Just like other stocks, banks have different dividend track records and payout ratios. Let’s take a look.
- RBC has a dividend yield of 2.3%-2.5% and a payout ratio of 41%-44%.
- TD has a dividend yield of 2.5%-2.6% and a payout ratio of 36%-46%.
- Scotiabank has a dividend yield of 3.4%-3.5% and a payout ratio of 51%-58%.
- CIBC has a dividend yield of 2.6%-2.7% and a payout ratio of 40%.
- BMO has a dividend yield of 2.8% and a payout ratio of 52%-54%.
- National Bank of Canada has a dividend yield of 2.4%- 2.5% and a payout ratio of 41%- 44%.
What are the Risks from Credit Losses, Tariff Losses and US Exposure?
While there are lots of risks that the big six face from credit losses, tariff losses and US exposure, they can absorb these risks, partially due to capital requirements. Some of these risks include:
- More loan losses
- Higher delinquency rates on commercial loans
- Added financial pressure to cross-border commercial borrowers
- Having bank branches in the US
- Stricter regulatory enforcement
What is TD’s US Anti-Money Laundering Penalty and Asset Cap?
TD Bank received a total of $3.09 billion in financial penalties and an open-ended asset cap on US retail banking operations for Bank Secrecy Act and anti-money laundering violations. Multiple US enforcement agencies split this fine.
