Key takeaways
- Banks print money in Canada: The Canadian banking sector is one of the most concentrated in the world, with a handful of major players controlling the vast majority of deposits, lending, and wealth management. That kind of dominance translates into consistent earnings and reliable dividends for long-term investors.
- Different banks, different strengths: Royal Bank and Bank of Montreal give you large-cap stability with global diversification, National Bank offers a Quebec-rooted growth story that keeps surprising people, and EQB is a digital-first lender growing its book at a pace the Big Five can’t match. There’s a pick here for almost every type of investor.
- Credit risk and regulation matter: TD is still dealing with the fallout from its anti-money laundering issues, and Bank of Nova Scotia’s heavy exposure to international markets adds a layer of uncertainty that domestic-focused peers don’t carry. Rising consumer debt levels and a potential slowdown in housing could also pressure loan loss provisions across the board, so don’t treat any bank stock as a set-and-forget decision.
Six banks. That’s the entire Canadian banking sector, and yet I could write ten thousand words on each one and never repeat myself. RBC and TD play a completely different game than EQB, which doesn’t even run branches. Scotiabank’s story right now has almost nothing to do with what’s happening at National. That’s the part people miss when they treat this group as one interchangeable basket of dividend payers.
Steady returns sounds like a boring goal until you actually try to build a portfolio around it. I’m not looking for the bank that pops 40% in a good year. I’m looking for the ones that keep paying, keep growing that payout, and don’t blow up their balance sheet chasing growth in a market they don’t understand. That’s a much smaller list than people assume.
Capital ratios matter more to me than almost anything else in this sector. A bank sitting on a thick capital cushion can absorb a bad quarter of loan losses without touching the dividend. One running lean can’t, and that gap only shows up when the economy actually gets tested, not when things are calm. I’ve written before about how each of the Big Six banks stacks up on exactly this kind of detail.
Growth engines vary a ton too. Some of these banks are still leaning hard on domestic mortgages and commercial lending. Others have pushed into wealth management, capital markets, or in EQB’s case, a digital-first model that skips the overhead of a traditional branch network entirely. I ranked the group by tier not long ago in my Big 6 bank rankings, and the spread between the top and bottom was bigger than I expected.
Valuation is where GARP investors like me actually earn their money. A great bank at a stretched price isn’t a great investment, it’s just a great bank you overpaid for. I’ve covered the CIBC turnaround story and National’s rough quarter separately because both raised the same question: is the weakness temporary, or is it telling you something real?
So which of these six actually deserve a spot in a portfolio built for the long haul, and which ones are better admired from a distance? Let’s get into each name.
In This Article
- Canadian Imperial Bank of Commerce (CM.TO)
- National Bank of Canada (NA.TO)
- Royal Bank of Canada (RY.TO)
- EQB Inc. (EQB.TO)
- Scotiabank (BNS.TO)
- The Toronto-Dominion Bank (TD.TO)
Canadian Imperial Bank of Commerce (TSX: CM)
$158.27
Overall Grade5.9 / 10
Canadian Imperial Bank of Commerce (CIBC) operates as a diversified financial institution serving individuals, small businesses, commercial, corporate, and institutional clients. The bank's business model is structured around four main strategic business units: Canadian Personal and Business Banking, Canadian Commercial Banking and Wealth Management, U.S...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E16.0
P/B2.2
P/S4.7
P/FCF-
FCF Yield-
Growth & Outlook
Rev Growth (YoY)+15.3%
EPS Growth (YoY)+25.7%
Revenue 5yr+9.4%
EPS 5yr+9.8%
FCF 5yr-
Fundamentals
Market Cap$143.7B
Dividend Yield2.7%
Operating Margin-
ROE+15.6%
Interest Coverage-
Competitive Edge
- CIBC's four-pillar structure (Canadian retail, Canadian commercial/wealth, U.S. commercial/wealth, Capital Markets) creates natural diversification. The U.S. segment's recovery proves the 2017 PrivateBancorp acquisition is finally delivering through-cycle returns.
- Canadian wealth management benefits from structural AUM growth as aging demographics drive retirement planning demand. CIBC's integrated banking-wealth model creates cross-selling stickiness that pure-play wealth managers like CI Financial cannot replicate.
- CIBC's Capital Markets franchise is gaining share in Canadian investment banking and global markets. The 25.6% non-interest income growth suggests the direct banking platform and trading desks are winning mandates, not just riding market beta.
- Among the Big Six, CIBC has the most concentrated Canadian mortgage book, which becomes an advantage in a rate-cutting cycle. Lower rates reduce payment shock risk on renewals and stimulate housing activity, directly benefiting the $340B personal banking book.
By the Numbers
- Capital Markets revenue surged 28.1% YoY to $6.1B in FY2025, with non-interest income up 25.6% to $5.6B. This segment now contributes 21% of total revenue, up from roughly 15% five years ago, diversifying away from rate-sensitive lending income.
- U.S. Commercial Banking EBT exploded 117.7% YoY to $1.18B on only 14% revenue growth, implying massive operating leverage as credit costs normalized from the FY2023 trough of $380M. This segment's margin recovery is the single biggest earnings swing story.
- Canadian Commercial Banking & Wealth Management NII accelerated sharply to 32.6% YoY growth (from 13.4% prior year), reaching $2.96B. Combined with steady non-interest income growth of 4.1%, this segment's revenue mix is shifting toward higher-margin spread income.
- Provision for loan losses grew only 8.6% YoY versus gross loan growth of 5.1%, and the allowance-to-loan growth gap is narrowing. After a 44.6% 5Y CAGR in provisions, the deceleration to single digits signals the credit cycle may be peaking for CIBC.
- Total shareholder yield of 5.95% (2.8% dividend, 2.2% buyback, 0.9% debt paydown) is compelling. Share count declined 1.75% YoY, confirming buybacks are genuinely retiring shares, not just offsetting the minimal 0.13% SBC-to-revenue dilution.
Risk Factors
- Allowance for loan losses has compounded at 10.1% over 10 years versus loan growth of 7.4%, meaning loss coverage is structurally rising. If Canada's housing market weakens further, the $339.9B Canadian Personal Banking asset base is heavily exposed.
- Canadian Personal & Business Banking EBT grew only 4.9% YoY on 10% revenue growth, meaning the efficiency ratio deteriorated. Rising non-interest expenses are absorbing the NII gains, and quarterly EBT swung from +20.3% to -12.5% QoQ, showing earnings volatility.
- Capital Markets NII remains wildly unstable: it fell 72.2% in FY2024, then rebounded 65.3% in FY2025, and the most recent quarter showed a -49.2% QoQ drop. This volatility makes the segment's $501M NII contribution unreliable for forward modeling.
- Corporate & Other segment swung to -$740M EBT (from -$445M prior year), a 66.3% deterioration. This catch-all bucket often contains hedging losses and treasury costs that obscure the true profitability of operating segments.
- The PEG ratio of 9.44 is extremely elevated, suggesting the market is pricing in growth that far exceeds what consensus estimates imply. With EPS growth expected to decelerate from 25.7% YoY to roughly 7.6% (Y1 to Y2), the current multiple has limited expansion room.
National Bank of Canada (TSX: NA)
$202.51
Overall Grade5.9 / 10
National Bank of Canada (Banque Nationale du Canada) is the sixth-largest commercial bank in Canada and a systemically important financial institution. Founded in 1859 and headquartered in Montreal, the bank provides a comprehensive range of financial products and services to retail, commercial, corporate, and institutional clients...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E18.2
P/B2.4
P/S5.3
P/FCF3.1
FCF Yield+32.5%
Growth & Outlook
Rev Growth (YoY)+20.2%
EPS Growth (YoY)+7.5%
Revenue 5yr+11.6%
EPS 5yr+8.8%
FCF 5yr-
Fundamentals
Market Cap$78.0B
Dividend Yield2.6%
Operating Margin-
ROE+13.9%
Interest Coverage-
Competitive Edge
- Quebec market share is the real moat. National Bank holds roughly a quarter of retail deposits and lending in the province, a position Royal Bank and TD have spent decades failing to dislodge, which lets it price loans with less discounting than a challenger bank in Ontario would need.
- The CWB deal bought something none of the Big Five could buy cheaply: an established commercial franchise in Alberta and British Columbia with existing client relationships. It converts National Bank from a regional Quebec lender into a genuinely national commercial bank in one step.
- Credigy buys distressed and specialty consumer portfolios in the US at a discount to face value, an activity the larger Canadian banks have largely avoided. It is a spread business that widens when credit conditions worsen, which partially offsets the domestic lending cycle.
- Financial Markets punches above its size in Canadian government and provincial debt underwriting and in equity derivatives, where the bank has long held share disproportionate to its balance sheet. That franchise is sticky because dealer relationships with Quebec issuers are relationship-driven.
- Being designated a domestic systemically important bank by OSFI is a two-sided coin, but the capital surcharge also functions as a regulatory barrier that keeps smaller entrants from competing at the same funding cost.
By the Numbers
- Financial Markets pre-tax profit compounded from $885M in FY2023 to $2,078B in FY2025, a 53.5% gain in the latest year alone, while its average assets grew only 15.9%. The segment is earning more per dollar of balance sheet, not just adding risk-weighted assets.
- Wealth Management pre-tax income rose 15.5% to $1,333B on 16.3% revenue growth, and the segment carries only $11.2B of average assets. That is the highest return-on-asset business in the bank and now roughly a quarter of segment profit with almost no credit risk attached.
- Provisions for credit losses fell 16.8% in the latest year while the allowance for loan losses grew 16.7%. Reserve build outpacing charge-through is a defensive posture, not a stretch for earnings.
- USSF&I pre-tax income of $889M on $32.5B of average assets has grown for three straight years at double digits, 14.4% then 12.0%, with revenue up 14.6%. Credigy and ABA Bank keep delivering the widest spreads in the group.
- Five-year total return of 18.1% a year and three-year of 32.7% were achieved with a maximum drawdown of only 24% over the window and 12% annualised downside deviation, an unusual pairing of return and shallow drawdowns for a bank.
Risk Factors
- Personal & Commercial pre-tax income fell 17.1% to $1,536B in FY2025 even as segment revenue rose 18.8% and average assets jumped 26.1%. The CWB acquisition added balance sheet and revenue faster than it added profit, and retail is now the weakest earner on a returns basis.
- The EPS decomposition tells the story: revenue grew 10.2% a year from FY2022 to FY2025, but margin effect took 4.3% a year and share count grew 3.9% a year, leaving EPS growth of just 1.6% a year. Growth has been bought, not earned.
- Share count rose 10.6% in the last year against a buyback yield of 1.5%. Repurchases are running well behind acquisition-related issuance, so per-share economics lag the headline growth.
- Financial Markets is now the largest profit pool at $2,078B pre-tax, up 53.5%, but its non-interest income growth already decelerated from 49.4% to 14.7%. Trading and underwriting revenue is the most cyclical line in the bank and it is carrying the FY2025 result.
- Other Segment pre-tax loss widened 86.2% to negative $702M, with non-interest income down 94.2% to $8M. Corporate-level drags of this size mask how much of the operating segments' gains reach the bottom line.
Royal Bank of Canada (TSX: RY)
$278.91
Overall Grade5.9 / 10
Royal Bank of Canada (RBC) is a diversified global financial services company and the largest bank in Canada by market capitalization. The bank's business model is structured around five primary segments: Personal Banking, Commercial Banking, Wealth Management, Insurance, and Capital Markets...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E18.5
P/B2.8
P/S5.7
P/FCF5.3
FCF Yield+19.0%
Growth & Outlook
Rev Growth (YoY)+11.4%
EPS Growth (YoY)+20.0%
Revenue 5yr+6.7%
EPS 5yr+8.4%
FCF 5yr-
Fundamentals
Market Cap$386.1B
Dividend Yield2.5%
Operating Margin-
ROE+16.2%
Interest Coverage-
Competitive Edge
- The HSBC Canada acquisition closed in FY2024, adding roughly $50B in commercial banking assets. Integration synergies are now flowing through, visible in Commercial Banking's 16% revenue growth, and the branch overlap creates cost takeout runway into FY2026.
- RBC's dominance in Canadian wealth management, with over $1T in AUM across RBC GAM and City National, creates a fee-based revenue stream that compounds with equity markets. This reduces earnings sensitivity to the credit cycle relative to pure lending peers like CIBC or BMO.
- Canada's oligopolistic banking structure, with five banks controlling over 85% of deposits, creates regulatory and scale barriers that effectively prevent new entrants. RBC's largest-bank status gives it pricing power on both sides of the balance sheet.
- RBC's Capital Markets franchise is the only Canadian bank with a globally competitive investment banking and trading operation. The 20.1% revenue growth in FY2025 reflects market share gains in advisory and underwriting, not just market tailwinds.
- Insurance operations, while small at $1.3B revenue, provide natural hedging against interest rate movements and diversify earnings away from credit-sensitive businesses. The segment's 7.4% EBT growth shows steady contribution without capital intensity.
By the Numbers
- Capital Markets NII surged 50.5% YoY to $4.8B in FY2025 after two consecutive years of decline, while non-interest income grew 9.2% to $9.6B. This segment's EBT jumped 28.5%, signaling a broad-based recovery rather than a one-time trading gain.
- Provision for loan losses declined 4.4% YoY even as gross loans grew 8.1%. Allowance growth of just 2.2% vs. 8.1% loan growth suggests credit quality is stabilizing, not deteriorating, which directly supports forward earnings power.
- Personal Banking EBT grew 21% YoY on only 14.5% revenue growth, implying meaningful operating leverage. The segment now generates $9.7B in pre-tax income, making it the single largest profit contributor and a high-quality earnings anchor.
- Shares outstanding fell 1.1% YoY while the bank repurchased $18.8B in stock. Combined with a 2.3% dividend yield and 0.2% debt paydown yield, total shareholder yield of 4% is well-funded by an FCF payout ratio of just 12.3%.
- Wealth Management EBT surged 28.1% to $5.5B on 14% revenue growth, the widest margin expansion across all segments. Fee-based non-interest income of $16.9B grew 15.5%, indicating strong AUM-driven momentum that compounds with market appreciation.
Risk Factors
- Current P/E of 17.8x sits 40% above the historical average of 12.8x, and P/B of 2.7x is 47% above its historical 1.8x. The Valuation grade of 0/10 confirms the stock is priced for near-flawless execution with no margin of safety.
- Allowance for loan losses has compounded at 13.1% annually over 10 years, outpacing gross loan growth of 8% over the same period. This long-term divergence suggests the loan book's risk profile has structurally shifted higher even if the latest year looks benign.
- Commercial Banking asset growth decelerated sharply from 37.6% in FY2024 to 4.9% in FY2025, yet NII growth only slowed from 27% to 19.9%. If loan growth continues normalizing, NII will compress unless spreads widen, which rate cuts make unlikely.
- PEG ratio of 5.28 implies the market is paying a steep premium per unit of growth. With consensus EPS growth of roughly 11% annually through FY2027, the stock needs sustained multiple expansion or earnings beats to justify the current price.
- Corporate Support losses totaled $644M in EBT for FY2025. While improved from the $1.9B loss in FY2024, this segment has been a persistent drag, absorbing hedging costs and integration expenses that reduce consolidated returns on equity.
EQB Inc. (TSX: EQB)
$124.37
Overall Grade5.4 / 10
EQB Inc. (TSX: EQB) is a leading Canadian digital financial institution and the parent company of Equitable Bank, Canada's seventh-largest Schedule I bank by assets...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E-592.0
P/B1.5
P/S4.6
P/FCF-40.8
FCF Yield-2.5%
Growth & Outlook
Rev Growth (YoY)-22.3%
EPS Growth (YoY)-102.7%
Revenue 5yr-
EPS 5yr-
FCF 5yr-
Fundamentals
Market Cap$5.3B
Dividend Yield2.0%
Operating Margin-
ROE0.0%
Interest Coverage-
Competitive Edge
- Equitable Bank's branchless digital model keeps the efficiency ratio structurally lower than branch-heavy peers like Laurentian or the regional divisions of the Big Six, letting EQ Bank compete on deposit rates without branch overhead.
- EQ Bank customer count hit 607,000, up 18.3% YoY, and has compounded above 20% annually since 2022, a low-cost digital acquisition engine the legacy banks structurally cannot replicate without cannibalizing branch economics.
- Management's dividend has grown 24% annually over five years while still buying back stock, a rare combination in Canadian banking that signals confidence in normalized earnings power beyond this year's provisioning cycle.
- As Canada's seventh-largest Schedule I bank, EQB carries the same federal deposit insurance and regulatory standing as the majors, giving it credibility to gather deposits nationally despite having no branch network.
By the Numbers
- Shareholder yield of 7.8% (1.6% dividend plus 6.0% buybacks) sits well above the 2% dividend alone, and buybacks are actually shrinking share count, down 3.4% over the last year, not just offsetting SBC.
- SBC runs at just 0.4% of revenue, one of the lowest levels in Canadian financials, meaning reported margins aren't being artificially flattered by non-cash comp add-backs.
- Net interest income grew 73% YoY while loans under management grew only 4%, suggesting NIM expansion and funding cost improvement are driving earnings, not just balance sheet growth.
- EQ Bank deposits grew 9.8% YoY to $9.9B and AUM crossed $87.3B, up 10% YoY, showing the digital deposit franchise keeps scaling even as the loan book growth has cooled to single digits.
- Three-year total shareholder return of 20.1% annualized shows the market has rewarded the stock well above what current headline profitability metrics would suggest, pointing to forward-looking confidence in normalized earnings.
Risk Factors
- Provision for loan losses grew 238% YoY while gross loans grew just 4%, a massive mismatch that signals credit quality deterioration is running far ahead of book growth.
- Allowance for loan losses jumped 185% YoY, more than triple the provision growth rate implies reserve building against expected future losses, not just current charge-offs.
- ROE collapsed to 8.5% in FY2025 from 17.5% in FY2023, and the most recent quarter posted a negative 16.2% ROE, a 349% QoQ decline, pointing to an active earnings shock, not a gradual drift.
- EPS fell 4.1% annualized between FY2022 and FY2025 despite revenue growing 14.7% annualized over the same period, meaning margin compression alone erased all the topline gains and then some.
- P/FCF of -36x compares to a -9x five-year average, a 298% deterioration, while FCF-to-net-income conversion of 126x is meaningless noise given net income is near zero this period.
Scotiabank (TSX: BNS)
$129.93
Overall Grade5.3 / 10
The Bank of Nova Scotia (Scotiabank) is a leading multinational financial services provider and one of Canada's Big Five banks. The company operates through four primary business segments: Canadian Banking, International Banking, Global Wealth Management, and Global Banking and Markets...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E16.1
P/B1.7
P/S3.8
P/FCF23.7
FCF Yield+4.2%
Growth & Outlook
Rev Growth (YoY)+10.7%
EPS Growth (YoY)+47.1%
Revenue 5yr+4.5%
EPS 5yr+1.4%
FCF 5yr-
Fundamentals
Market Cap$158.4B
Dividend Yield3.5%
Operating Margin-
ROE+11.5%
Interest Coverage-
Competitive Edge
- Scotiabank's Pacific Alliance footprint (Mexico, Peru, Chile, Colombia) gives it a growth lever domestic-only peers like TD and CIBC lack, evident in International Banking's $12B revenue base and consistent segment profitability.
- The Global Wealth Management business is scaling revenue mix, up to $6.4B from $5.4B in FY2022, without matching balance sheet risk, improving the bank's overall earnings quality over time.
- Global Banking & Markets rebounding sharply after three years of margin pressure suggests capital markets normalization is underway, a cyclical tailwind that doesn't require new strategy, just a better trading and underwriting backdrop.
By the Numbers
- Global Banking & Markets income before taxes jumped 32.5% YoY to $2.5B, reversing three straight years of decline, with Q4 alone up 42.1% QoQ, a real inflection in the trading and capital markets business.
- Global Wealth revenue grew 15% YoY to $6.4B, the fastest pace in five years, with net interest income there up 30.4% YoY, a mix shift toward fee-based, less capital-intensive earnings.
- Shareholder yield of 5.7% blends a 3.9% dividend with 1.5% buybacks and 0.5% debt paydown, and shares outstanding actually fell 0.9% over the year, so repurchases are shrinking the float, not just offsetting SBC.
- Stock-based comp is just 0.03% of revenue, near zero versus most banks, meaning reported EPS is not being flattered by non-cash comp add-backs.
- Three-year total return of 28.6% annualized and a Momentum grade of 9.5/10 with the stock sitting at its 52-week high show the market re-rating the stock well ahead of the earnings recovery.
Risk Factors
- P/FCF sits at 25.5x versus a 5-year average of just 4.8x, a 430% premium, the single most extreme valuation gap in the dataset and impossible to justify on current FCF generation.
- EPS fell 11% a year from FY2022 to FY2025 even as revenue grew 3.2% a year, meaning margin compression, not the top line, is what's dragging the bottom line, per the Growth grade breakdown.
- Canadian Banking pretax income fell 9.4% YoY to $4.7B despite revenue growing 3%, a sign that provisions or costs are eating into the bank's largest and most stable segment.
- The 'Other' segment posted a negative $2.6B pretax drag in FY2025, worsening every year since FY2021's -$366M, a structural corporate/treasury hole that consolidated results have to overcome every year.
- FCF payout ratio of 94.6% versus an earnings payout ratio of 62.8% shows the dividend is far less comfortably covered by cash generation than the earnings-based payout ratio implies.
The Toronto-Dominion Bank (TSX: TD)
$168.07
Overall Grade5.3 / 10
The Toronto-Dominion Bank, commonly known as TD Bank Group, is a leading North American financial institution providing a comprehensive suite of financial products and services. The bank's business model is highly diversified across four main operating segments: Canadian Personal and Commercial Banking, U.S...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E18.0
P/B2.2
P/S4.3
P/FCF54.7
FCF Yield+1.8%
Growth & Outlook
Rev Growth (YoY)-3.7%
EPS Growth (YoY)-20.1%
Revenue 5yr+7.3%
EPS 5yr+1.9%
FCF 5yr-
Fundamentals
Market Cap$275.4B
Dividend Yield2.7%
Operating Margin-
ROE+12.8%
Interest Coverage-
Competitive Edge
- TD's Canadian Retail franchise (Personal & Commercial plus Wealth) generates $13.9B of pre-tax income on a nearly duopoly-protected market structure alongside RBC, BMO, Scotiabank and CIBC, giving it durable pricing power domestically.
- The bank's Schwab stake and wealth management fee income ($13.1B non-interest income, up 6.2% YoY) provide a capital-light, market-linked earnings stream that diversifies away from pure spread-based lending.
- TD's US retail branch network remains one of the largest foreign-owned footprints in the US Northeast and Southeast, a distribution asset that is difficult and slow for a domestic competitor to replicate organically.
By the Numbers
- Wholesale Banking pre-tax income jumped 47.5% YoY to $2.05B while Wealth Management pre-tax income surged 45% to $3.78B, showing the fee-based businesses are picking up slack from a stalling US segment.
- Total shareholder yield of 6.4% (2.8% dividend, 3.3% buyback) shows management returning capital aggressively even while EPS fell 20.1% YoY, likely funded by the large one-time Corporate segment gain.
- Net interest income grew 9.3% YoY, ahead of the 5-year CAGR of 8.2%, showing core lending spread income is still compounding faster than its historical trend despite the noisy headline EPS decline.
- Corporate segment pre-tax income swung from a -$2.2B loss in FY2024 to +$6.5B in FY2025, a 389.6% move that appears to reflect the resolution of the US regulatory/AML overhang rather than organic banking strength.
- Provision for credit losses fell 15% YoY even as gross loans grew 5.8%, suggesting credit quality is stabilizing rather than deteriorating despite three prior years of rising provisions.
Risk Factors
- EPS fell 20.1% YoY even as revenue only fell 3.7%, meaning margin compression and share dynamics did far more damage to the bottom line than the top line implies.
- US Retail Non-Interest Income collapsed from $2.11B to -$63M YoY, a 103% swing, and US Retail assets shrank 12.5% YoY after four years of growth, the clearest sign the US franchise is still being restructured post-AML settlement.
- FCF payout ratio sits at 155.6% against an earnings payout ratio of just 50.2%, a massive gap showing the dividend is comfortably covered by earnings but not by actual free cash flow.
- P/FCF of 56.3x is nearly 20x the 5-year average of 2.7x, and FCF yield of 1.8% sits 79% below its historical average, an extreme valuation gap that isn't explained by any comparable improvement in cash generation.
- Wholesale Banking net interest income went negative (-$18M) for the first time after three straight years of decline (from $2.94B in FY2022), even as non-interest income there rose to $8.4B, meaning the trading/markets book is now doing all the work.
Banks are the one sector where I think most Canadian investors are actually overexposed and underexposed at the same time. Overexposed because half this country owns two or three of these names through index funds, pensions, and direct holdings without realizing how concentrated that bet really is. Underexposed because most people never look past the yield to ask whether the bank earning that dividend is actually getting stronger or just coasting on its size.
My honest take is that scale gets treated as safety in this sector far more than it deserves to be. A massive balance sheet can hide a lot of mediocre decisions for a long time, right up until it can’t. I’d rather own a bank that’s disciplined about where it grows than one that’s simply the biggest name in the room.
None of these six are broken businesses. But only some of them are actually being run for the next decade instead of the next earnings call, and that’s the distinction I keep coming back to.
