Barlow’s Research Roundup: Five Canadian stocks among RBC analysts’ top financial stock ideas

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Equities

There are fewer Canadian stocks on the RBC global equity team’s best stock ideas in global financials than I expected, and no banks,

“Since our last iteration of the Best Ideas report published on March 27th, 2026, our Best Ideas list delivered an average total return of 16 per cent in local currency (16 per cent in USD) versus the World Financials Index which delivered a return of 13 per cent (USD), the S&P 500 of 15 per cent (USD), the S&P Europe 350 of 12 per vcent (USD) and the S&P/TSX composite Index of 7 per cent (USD). Additions: We have added RDN US. •Deletions: We have removed PPS AU.

“Macro View: The economic outlook is key for investing in financial stocks, but current geopolitical events create uncertainty. The pullback in financials share prices since the escalation of the Middle East conflict has opened up some investment opportunities across the space, but given the uncertainty about the implications for inflation, rates and economic growth, we remain selective in our stock selection and update some of our key picks”.

The stocks are: ABN AMRO Bank N.V., Ares Management Corporation, American Express Company, Axis Capital Holdings Limited, Brookfield Corporation, Blackstone Inc., AXA, Element Fleet Management Corp., EQB Inc., Fairfax Financial Holdings Limited, Huntington Bancshares Incorporated, Hiscox Ltd, Invesco Ltd., London Stock Exchange Group PLC, Moody’s Corporation, Manulife Financial Corporation, Radian Group Inc., Banco Santander SA, U.S. Bancorp. Wells Fargo & Company, Wintrust Financial Corporation and Zip Co Limited.

Banks

Scotiabank analyst Mike Rizvanovic highlighted a regulatory change for the major domestic banks that increases lending capacity (which they probably won’t use),

“The Office of the Superintendent of Financial Institutions (OSFI), Canada’s main regulator for banks and life insurers, announced that it is lowering the high end of the range for the Domestic Stability Buffer (DSB) that the Canadian banks have to incorporate within their CET 1 capital ratios. The new range for the DSB will be reset to 0 per cent-3 per cent vs. 0 per cent-4 per cent previously. That 100 bps change at the top end of the DSB range was not expected by the market, and we believe is a positive surprise that will benefit each of the large Canadian banks in terms of providing even more excess capital … Excess capital almost doubles for the large banks following a change to the DSB range, while we estimate that ROEs on a pro forma basis will benefit by roughly 100 bps as targeted CET 1 ratios move down to 11.5 per cent to 12.0 per cent as a destination level. The change should also alleviate concerns around the Canadian banks being potentially disadvantaged by capital relief being provided for banks in other jurisdictions such as the U.S … While OSFI’s change to the DSB will provide more capacity for the large Canadian banks to lend, we don’t believe loan growth will get meaningfully better in the near term. Loan volumes, in our view, remain largely dependent on demand, which is uncertain in the commercial book in light of CUSMA negotiations, while consumer lending remains constrained. Further, the banks already carry excess capital”.

Mr. Rizvanovic has “sector outperform” ratings on Bank of Montreal (BMO-T), National Bank of Canada (NA-T), Royal Bank of Canada (RY-T) and Toronto-Dominion Bank (TD-T).

Diversification

Evercore ISI strategist Juan Emanuel identifies the difficulties finding diversification in the current market and comes up with a solution,

“The surge since 3/30 is being catalyzed by capital markets, cooling geopolitics and rising speculation. Equity issuance, even when including Generational IPOs ahead, remains below levels indicating major tops, highlighting more upside ahead. The Market is Deep in Concentration as investing in the S&P 500 is increasingly investing in AI with the top ten stocks accounting for 40 per cent weight in index and a majority of index EPS upgrades and price outperformance. When looking to diversify, benefits from a RoW allocation, Bonds and Gold have all diminished considerably. EM is now more tech heavy than the S&P 500, inflation has flipped the stock/bond correlation and Gold has recently failed hedging geopolitical risk off. Momentous dynamics taking place within the S&P 500 though could offer an alternative. Single stock volatility is high, implied correlations between stocks are low and a surging number of stocks now trade inversely with the S&P 500 … For investors fully exposed to AI, EVR ISI Strategy highlights ‘Negative Beta’ stocks with upwards EPS revisions as an attractive strategy to retain long exposure to equity upside and navigate near-term volatility from new Warsh Fed. Such stocks also act natural diversifier instead of either Index Put options or an overweight cash position”

There are 43 stocks on the negative beta list, too many to list here, and in addition it includes a lot of energy and financial stocks where domestic investors would rather invest in those sectors with domestic stocks. Companies most likely to interest Canadian investors include Costco Wholesale Corp., Coca-Cola, PepsiCo., Mondelez International, Altria Group Inc., Kinder Morgan inc., Keurig Dr Pepper Inc. and Paychex Inc.

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Diversion

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