Despite concerns about the impact of tariffs, Canada's Big Six banks have gained nearly 40 per cent in 2025, on average, including dividends.The Canadian Press
If you are looking for the ultimate Buy Canada move as a snub to U.S. President Donald Trump’s 51st state trolling, you could book a vacation on Prince Edward Island or add B.C. wines to your cellar.
But the real boss move? Buy a Canadian bank stock.
With one purchase, you’ve bet on a lot of moving parts in your home country, from housing and commercial lending, to capital markets activity and wealth management.
Though the biggest banks have far-flung operations in many parts of the world, including the United States, domestic operations remain central to their profit engines.
Those engines are humming.
Despite simmering concerns about the impact of tariffs, the Big Six banks have gained nearly 40 per cent in 2025, on average, including dividends.
A breakdown of the big banks’ year-end earnings
Bankers’ bonuses rose in 2025 as capital markets, wealth management divisions pushed profits higher
The gains were powered by strong profit growth and rising valuations. As well, the banks believe that they have built up adequate provisions against expected credit losses in an uneven economy, adding a sense of relief.
“That’ll be a bit of a tailwind to earnings,” said Monica Yeung, a portfolio manager at TD Asset Management.
“We’ve reached an inflection point now where banks are pivoting back to their historical 7 to 10 per cent earnings growth,” she added.
The group has outperformed the S&P/TSX Composite Index – also including dividends – by 9 percentage points in the year-to-date underscoring why bank stocks tend to be popular with long-term investors.
You could own them all. But picking the right stock at the right time can make a big difference to your returns.
In 2024, the difference between the best-performing big bank stock and the worst was a chasmic 53 percentage points.
This year, returns have been far more clustered: Just 12 percentage points separated five of the six biggest banks.
The outlier? Toronto-Dominion Bank TD-T rebounded nearly 60 per cent this year as of Dec. 5, beating its closest peer Canadian Imperial Bank of Commerce CM-T by 21 percentage points.
If you’re looking for a winner among the Big Six to hold through 2026, here are three simple approaches that might help narrow your search – and boost your returns.
Embrace the dog: The case for Royal Bank of Canada RY-T.
Oligopolies have their advantages. A small number of large players in a sector virtually guarantees big profits, fat margins and stable dividends.
In the case of Canada’s largest banks, this cozy environment has often rewarded investors who focus on laggards – those banks that, for whatever reason, fail to keep up with their peers.
The reason? Bank laggards tend to rebound.
Last year, TD was the standout dog. A U.S. regulatory ruling on the bank’s anti-money laundering practices imposed a US$3-billion fine and severe limits on its U.S. expansion.
It looked bad. TD’s stock fell 11 per cent in 2024, massively underperforming all of its peers. Few analysts saw much potential for a rebound, and who can blame them?
The buy-the-laggard strategy has endured its share of misfires. But not in 2025, with TD leading the pack.
This year, fans of the strategy should consider Royal Bank of Canada. At the end of November – prior to the start of the fiscal fourth quarter earnings season, which can cause some noise within the sector – the stock trailed all of its peers in 2025.
There are a few details to point out before you swan dive into this strategy.
RBC is hardly struggling through operational challenges. It reported $20.4-billion in net earnings this fiscal year, which ended Oct. 31, up 25 per cent from the same period last year.
The stock isn’t exactly beaten-up, either. It was up 24.7 per cent at the end of November, and commands a premium valuation.
And lastly, RBC has been lagging its peers by a wafer-thin margin, suggesting that the stock’s rebound potential could be limited.
As dogs go, RBC isn’t a big one. But the stock’s lagging status may be enough to give it some oomph in the year ahead. The rebound may be starting already: The share price began to stir last week after the bank reported its quarterly results.
Grab the biggest dividend: The case for Bank of Nova Scotia BNS-T.
Dividend yields aren’t what they used to be. When the Bank of Canada was raising its key interest rate in 2022 and 2023, bank stocks delivered yields as high as 7 per cent.
Now, after a series of rate cuts over the past 18 months and steadily rising share prices, the average yield on a Big Six bank stock has shrivelled to just 3.5 per cent.
The good news: Bank of Nova Scotia’s yield is a full percentage point above this average, at 4.6 per cent.
The yield is also the highest yield among the lender’s peers and nearly two percentage points above Royal Bank of Canada and National Bank of Canada.
That means investors are getting paid more to hold Scotiabank shares, providing an attractive source of income.
It also means that the stock is relatively inexpensive, since a dividend yield can be a measure of valuation. A high yield can point to a cheap stock if that dividend is sustainable.
Lo and behold, Scotiabank is also cheaper than its peers based on price-to-earnings ratios. It trades at a 9 per cent discount to the group average, according to Paul Holden, an analyst at CIBC Capital Markets.
That is an attractive feature given rising valuations in the sector.
Okay, we must point out that Scotiabank often tops this list of dividend stars, including in 2024.
That’s because the bank, which has significant international operations, has been underperforming its peers for several years and is now in the midst of a strategic shift that involves transferring operations in Colombia, Costa Rica and Panama to Davivienda, a Colombian bank, and focusing on North American operations.
Over the past five years, through the end of November, Scotiabank’s share price gained 53 per cent. That is about half the gain of its five peers over the same period, on average, which has left the dividend yield relatively elevated.
But that looks more like an opportunity than a problem.
There are some encouraging signs that the bank is making the right moves.
In its fiscal fourth-quarter results, released last week, Scotiabank reported a 21-per-cent gain in its profits – adjusted for unusual things like restructuring charges and asset sales – over the same period last year, beating analysts’ estimates.
The bank is now targeting double-digit profit growth for its Canadian banking division in fiscal 2026, and expects it can play a role in the federal government’s plans for developing large-scale infrastructure.
“This renewed focus plays into our bank’s strengths as a trusted provider of capital and advice to key sectors such as mining, energy and critical infrastructure,” Scott Thomson, Scotiabank’s chief executive officer, said during a call with analysts last week.
No doubt, there could be bumps.
But the nice part about this strategy? Even if the bank misses its financial targets, the dividends will keep flowing.
Side with the best long-term performer: The case for National Bank of Canada NA-T.
Investors can sometimes get bogged down in the minutiae of day-to-day bank performance – focusing on, say, one bank’s exposure to the housing market, another’s cost-cutting efforts or another’s executive shuffle.
A simpler approach: Tune out the noise and buy the stock that has demolished its competitors over the longer term.
That’s National Bank of Canada, by a long shot.
Over the past five years, the stock has led the pack with gains of 135 per cent, according to data from Bloomberg. That is an astounding 48 percentage points better than the average of its five peers.
Over the past 10 years, the dominance looks even better. National Bank has gained 286 per cent. That’s 160 percentage points more than the peer average and about 100 points better than the bank’s closest competitor, RBC.
As the fine print says, past performance is no guarantee of future results. But National Bank isn’t on some sort of lucky streak here.
The Montreal-based bank has built a strong base of operations in Quebec, expanded its wealth management capabilities nationally and is now integrating Canadian Western Bank, which it acquired earlier this year.
It is clearly a strong business model, which has raised the profile of the bank. And it is not sitting still. Last week, National Bank announced a deal to buy Laurentian Bank of Canada’s retail business, which will add deposits and loans.
“They understand that they don’t want to go head-to-head against the TDs and the RBCs of the world, and have found ways to find profitable niches where they can earn premium returns,” said Ernest Wong, head of research at Baskin Wealth Management, which counts National Bank as its largest Canadian bank holding.
The bank’s dividend yield is below 3 per cent and the stock – up nearly 31 per cent this year – is no dog. But there is more than one way to pick a great bank stock.
Editor’s note: An earlier version of this article incorrectly stated that Bank of Nova Scotia is selling its operations in Colombia, Costa Rica and Panama. It is transferring these operations to Davivienda, a Colombian bank.