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3 Bank Stocks Selling at Steep Discounts

The stock market has been crushed so far in 2016. The S&P/TSX Composite Index down over 6.5%, and even though Canadian banks are some of the most financially stable corporations in the world, they too have been under pressure.

However, as long-term investors, we must shrug off this weakness in the market and see it for what it truly is–a prime opportunity to buy the stocks of great companies at steep discounts. With this in mind, let’s take a look at three of my top stock picks in the banking industry today.

1. Toronto-Dominion Bank

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is the largest bank in Canada with approximately $1.1 trillion in total assets, and its stock has fallen about 7.5% year-to-date.

At today’s levels, its stock trades at just 10.4 fiscal 2016’s estimated earnings per share of $4.83 and only 9.7 times fiscal 2017’s estimated earnings per share of $5.15, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 12.7. It also trades at a mere 1.48 times its book value per share of $33.81, which is very inexpensive compared with its five-year average market-to-book value of 1.77.

In addition, the company pays a quarterly dividend of $0.51 per share, or $2.04 per share annually, which gives its stock a 4.1% yield. Investors must also note that it has raised its annual dividend payment for five consecutive years, and it is currently on pace for 2016 to mark the sixth consecutive year with an increase.

2. Bank of Montreal

Bank of Montreal (TSX:BMO)(NYSE:BMO) is the fourth-largest bank in Canada with approximately $641.9 billion in total assets, and its stock has fallen over 8% year-to-date.

At today’s levels, its stock trades at just 10 times fiscal 2016’s estimated earnings per share of $7.18 and only 9.4 times fiscal 2017’s estimated earnings per share of $7.61, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 11.4. It also trades at a mere 1.27 times its book value per share of $56.31, which is very inexpensive compared with its five-year average market-to-book value of 1.54.

Additionally, the company pays a quarterly dividend of $0.84 per share, or $3.36 per share annually, which gives its stock a 4.7% yield. It is also very important to note that it has raised its annual dividend payment for three consecutive years, and it is currently on pace for 2016 to mark the fourth consecutive year with an increase.

3. Canadian Imperial Bank of Commerce

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is the fifth-largest bank in Canada with approximately $463.3 billion in total assets, and its stock has fallen over 6% year-to-date.

At today’s levels, its stock trades at just 8.9 times fiscal 2016’s estimated earnings per share of $9.64 and only 8.6 times fiscal 2017’s estimated earnings per share of $9.97, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 11.3. It also trades at a mere 1.67 times its book value per share of $51.25, which is very inexpensive compared with its five-year average market-to-book value of 2.15.

In addition, the company pays a quarterly dividend of $1.15 per share, or $4.60 per share annually, which gives its stock a 5.4% yield. Investors must also note that it has raised its annual dividend payment for five consecutive years, and it is currently on pace for 2016 to mark the sixth consecutive year with an increase.

Which of these big banks belongs in your portfolio?

Toronto-Dominion Bank, Bank of Montreal, and Canadian Imperial Bank of Commerce are three of the most attractive long-term investment options in the banking industry today. All Foolish investors should take a closer look and strongly consider using the weakness in the market to begin scaling in to positions in one of them.

Wait! Check out our TOP stock pick for 2016 and beyond

Exports of liquefied natural gas could be one of the best growth opportunities out there for long-term investors. And, we think we've identified the Canadian company to invest in. It's a global company with operations across nearly 20 countries and 70 locations. We like it so much, we've named it as 1 Top Stock for 2016 and Beyond. To find out why, click here now to learn how to access your FREE copy today!

Fool contributor Joseph Solitro has no position in any stocks mentioned.

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