Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Royal Bank of Canada (TSX:RY)(NYSE:RY) are long-time favourites among Canadian investors.

Let’s take a look at the two titans to see if one is a better pick right now.


TD is going through a restructuring process in both its Canadian and American operations as it attempts to become more nimble in a rapidly changing industry. The company took a $228 million charge in the second quarter and another hit could be coming with the Q4 results.

Investors should see the efforts in a positive light.

On the technology front, TD is partnering with FinTech companies to ensure it stays ahead of the curve in the evolution of the mobile payment market.

The company is also positioning itself to take advantage of online banking trends and plans to expand non-branch sales from 17% to 30% by 2020.

Economic headwinds have forced all of the banks to look for high-margin opportunities to drive earnings. TD has invested heavily in credit card portfolios in the past few years and recently launched a new web broker platform to boost revenue on the wealth management side of the operations.

CEO Bharat Masrani believes TD can hit its goal of 7% earnings growth over the medium term, despite the challenging market.

Housing and oil sector risks are on constantly on the minds of Canadian investors. TD’s Canadian residential mortgage portfolio is about $240 billion, with 57% of the loans insured. The loan-to-value ratio on the remaining mortgages is 59%.

TD’s energy exposure represents less than 1% of its total loan book.

The stock trades at 10.5 times forward earnings and pays a quarterly dividend of $0.51 per share that yields about 3.7%.

Royal Bank

Royal Bank is also investing heavily in new technology and is seeking alliances with FinTech start-ups to ensure it can fend off challenges from non-bank mobile payment players.

South of the border, the company is betting big on wealthy Americans through its recent US$5 billion acquisition of City National, a California-based wealth management and commercial banking firm. Royal Bank will combine its existing U.S. wealth management operations with City National, creating a group with about US$336 billion in assets.

The company’s Canadian residential mortgage portfolio is about $200 billion. Insured loans represent 40% of the total and the uninsured portion has a loan-to-value ratio of 55%.

Wholesale exposure to the energy sector represents about 1.6% of Royal Bank’s total loan book.

Royal Bank trades at 10.3 times forward earnings and pays a quarterly dividend of $0.79 per share that yields 4.2%.

Which should you buy?

Both companies are solid long-term picks with diversified revenue streams and manageable exposure to the riskier areas of the Canadian market. TD is probably a safer bet at the moment, but investors with a buy-and-hold strategy should be comfortable holding either name.

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Fool contributor Andrew Walker has no position in any stocks mentioned.