All figures as of July 2026. I own Royal Bank and National Bank. This is analysis, not personalized advice. This article was created with the assistance of AI, using the transcript from the video below.
Every one of the big six Canadian banks is a strong long-term holding. That’s what makes ranking them hard, and also what makes it worth doing: when six great companies compete for your dollar, someone still has to be sixth. So this is my S tier to E tier ranking of Royal Bank (RY), TD (TD), Bank of Montreal (BMO), Scotiabank (BNS), CIBC (CM) and National Bank (NA), one bank per tier, based on quality, growth, and, critically, price.
The framing: this is not 2023 anymore
One thing before the board, because it colours every ranking below. In 2023 you could buy most of the big Canadian banks below 10 times earnings. Those days are gone. The group now trades at elevated forward P/Es, and price-to-book tells the story even more drastically: banks that historically traded at 1.5 to 2 times book are now well above it, with Royal Bank near 3 times. The banks are priced for perfection, which means valuation has to be part of the grade. A top-end performer trading too expensive gets docked. That single principle explains most of the surprises on this list.
One data note: I use reported returns on equity throughout. Adjusted ROEs run higher for the banks that made big acquisitions (BMO with Bank of the West, Royal with HSBC Canada, National with Canadian Western), so treat the reported numbers as the floor.
E tier: Scotiabank (BNS): the perpetual laggard
I owned Scotiabank once, on the classic theory that the cheapest, worst-performing Canadian bank tends to rebound best. It didn’t work, and the long-term numbers explain why I moved on. Scotia’s 10-year total return with dividends reinvested is about 186%, roughly 11.1% annualized. Sounds fine, until you see TD at 13.1%, or Royal at 17.6%. That gap, compounded over a decade, is a monumental amount of money. This is where investors get satisfied with decent returns while better ones sit next door.
The reason is strategy: Scotia zigged into Latin America while every other bank zagged into the US, and the bad loans and lagging growth still weigh on it. The turnaround plan (exiting Latin America, focusing on the North American corridor) targets roughly 14% ROE by 2027. The problem: 14% is the destination, and the premier banks are already past it, with Scotia’s reported ROE sitting around 10.9% today. Provisions remain elevated, with one of the worst allowance ratios in the group, improving at the slowest pace.
You do get a better price, about 17x trailing earnings and 1.7x book, and the yield is fat. But this is a yield-and-turnaround bet, not a quality play. The softest of the big six. E tier.
D tier: TD Bank (TD): premier bank, capped engine
TD was my favourite bank for years; it was one of the first stocks I ever bought in 2009 alongside Royal. I sold when the anti-money-laundering scandal started to surface, before the big dip, and rotated into Royal and National, which outperformed. Honest admission: the AML drag hasn’t hurt TD’s share price long-term as much as I expected.
The core problem is the asset cap on US retail assets. The numbers make it stark: since 2023, US retail revenue has compounded at about 1.4% a year while the Canadian side grew at 6.1%. The growth engine that justified TD’s premium for two decades is regulator-frozen, and nobody knows when the cap comes off. To stay under it, TD keeps selling US assets, which is partly why it now holds the best CET1 capital ratio of the six, and why it spent about $22 billion on buybacks in the past year. Those buybacks are a real tailwind, and the Canadian retail franchise remains excellent.
But at nearly 20x earnings after a big run-up, you’re paying premier-bank prices for a bank with a capped engine. Tailwinds and headwinds in roughly equal measure: a premier institution I’d rank fifth of six today. D tier.
C tier: Royal Bank (RY): the best bank, priced like it
This is the one that ruffles feathers, because Royal is the best bank in Canada, full stop. Best operated, most defensive, biggest brand, arguably the most diverse loan book, plus City National finally performing in the US and HSBC Canada fully integrated. I own it, I’m bullish on it, and I’ll never sell it unless something cataclysmic happens.
But this is a ranking of stocks, not trophies. Royal trades near 19x earnings and almost 3x book, the richest multiple in the group, while growing deposits and loans in the mid single digits. The recent 20%+ earnings growth has been driven substantially by de-escalating provisions, and that’s a temporary tailwind; provisions can’t fall forever. When they flatline, you’re left with the largest company in the country needing to move the biggest needle, at the highest price.
If this were purely “name the best banks in Canada,” Royal moves straight up to S. On total returns from today’s price, I wouldn’t be surprised if the two banks above it outperform. Best in the country, priced as such. C tier.
B tier: Bank of Montreal (BMO): the recovery play
BMO is the value option of the group. It got into real trouble in 2023-24 with its US commercial real estate book: elevated loan-loss allowances, a sharp earnings drop, and ROE knocked down to about 11.2%, the middle-to-low end of the peer group.
The recovery is now visibly in motion. Provisions for credit losses are ticking steadily downward, allowances are normalizing, and earnings are rebuilding from the trough. Meanwhile you’re paying about 16.5x forward earnings and 2.1x book, cheaper than the premium names, without buying a strategic mess like Scotia’s. If provisions keep falling, there’s genuine upside here.
It’s not a table-pounder: ROE has historically been middle-of-the-pack, and the US CRE exposure that caused the damage hasn’t vanished. But as a price-conscious way to own a big six bank with a believable recovery path, it earns the B.
A tier: CIBC (CM): I was wrong, and it’s the one I’d buy today
I’ll be the first to admit it: I never liked CIBC. The outsized Canadian and residential mortgage exposure kept me away, and for most of my investing life that was the right call. Then 2023-24 happened. CIBC’s provisions peaked at $2.36 billion in early 2024, and then it did what none of the other banks were doing: it started cutting provisions while everyone else was still raising them. Earnings ripped from about $6.50 to over $10 per share, and reported ROE hit 15.1%, among the best of the six, essentially matching Royal.
Here’s the kicker: you get that performance at about 16.5x earnings versus Royal’s 19x. The discount likely exists because of that same Canadian concentration, and because CIBC burned its provision-release tailwind earlier than the others. Those are fair concerns. But right now CIBC is reporting some of the best results the big banks have printed in years, in a soft Canadian economy.
I own Royal, and long-term I still think Royal wins. But if I had to buy one Canadian bank today, it would be CIBC. That’s exactly what the A tier means.
S tier: National Bank (NA): small, aggressive, best in class
The most expensive bank of the six, at about 20x earnings and 2.6x book, in the S tier. Absurd? Here’s the case.
National is the smallest of the big six, which is precisely its advantage: it’s nimble enough that acquisitions actually move the needle. Canadian Western Bank expands it west, the Laurentian asset purchases deepen Quebec, the US specialty finance arms keep compounding, and there’s even a fast-growing bank in Cambodia for genuinely unique international exposure. Adjusted for acquisition costs, ROE runs near 17%, right up there with Royal, effectively best-in-class once you account for what it’s absorbing.
And the premium is smaller than it looks: 20x versus Royal’s 19x, while National grows faster, and Royal actually trades at the higher price-to-book. When a bank is run this well, I lean toward paying up. National doesn’t need a turnaround, it doesn’t need a cap removed, and it doesn’t need provisions to keep falling. It just needs to keep executing, and it has the best growth trajectory of the six over the next five to ten years. S tier.
The bottom line
| Tier | Bank | One line |
|---|---|---|
| S | National Bank (NA) | The best growth trajectory, worth the premium |
| A | CIBC (CM) | Best recent results in the group, at a discount |
| B | Bank of Montreal (BMO) | The recovery play at a fair price |
| C | Royal Bank (RY) | The best bank in Canada, fully priced |
| D | TD (TD) | Premier franchise, capped US engine |
| E | Scotiabank (BNS) | The decade-long laggard, still turning around |
The questions I get most:
You own Royal and National but ranked CIBC above Royal? Yes, and I’m not changing my positions. The ranking answers “which would I buy today at today’s prices,” not “which will I hold for twenty years.” Different questions, different answers.
Isn’t Scotiabank’s dividend reason enough to own it? The yield is real and the company isn’t going anywhere. But a decade of data says the cost of that yield was several points of annual total return versus its peers. Cheap plus improving beats cheap plus hoping.
Are the banks a buy at all right now? They’re priced for perfection after a huge run. I’d rather own the specific stories (National’s growth, CIBC’s momentum, BMO’s recovery) than “the banks” as a block at these multiples.
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