Regional Exposure With Canada’s Smaller Banks

Over the past five years, investors have experienced fantastic returns by holding Canada’s largest financial institutions. Shares of the big five banks have had an incredible run, with the two largest banks measured by market capitalization setting the tone.

Shares of Royal Bank of Canada (TSX:RY)(NYSE:RY) have experienced a price increase close to 65% in addition to a dividend which currently yields close to 3.75%. Shares of Toronto-Dominion Bank (TSX:TD)(NYSE:TD) have appreciated by close to 56% and currently offer investors a dividend in excess of 3.5%. Canada’s biggest banks have been very good to investors over the past five years.

Those looking beyond the country’s biggest banks for value may find it in smaller, regional financial institutions. Serving western Canada is Canadian Western Bank (TSX:CWB), while Laurentian Bank of Canada (TSX:LB) has carved out a niche in serving the province of Quebec.

Investors of Canadian Western Bank have seen the price of their investment do almost nothing over the past five years. The five year price return as of last Friday was -1.65%. Adding dividends back however, investors will be in positive territory over the same time frame. The unique position this company occupies is that of western Canada. With operation focused in Alberta, which is now beginning to recover after the demise of oil, the company may be offering the best upside of any one of Canada’s banks.

Investors who choose to purchase shares at the current price of $28 will receive a dividend yield close to 3.25%. Currently, the trailing price to earnings ratio is close to 13.5 times and tangible book value is no less than $25.80 per share.

Given the increase in value over the past six months, investors may want to take a look at this name before an oil recovery leads to a further economic recovery in the province. Time should be good to this company!

Moving east, to the province of Quebec, shares of Laurentian Bank of Canada have performed very well as of late. Over the past year, shares have increased by close to 25% in addition to a dividend yield of no less than 4%. The five year price return is an increase of approximately 32%.

Currently trading at a price of approximately $59, shares carry a tangible book value in the amount of $57.50 and trade at trailing earnings of 13 times. Investors are still getting a steal!


For investors looking for securities with the potential to outperform the broader financial sector, there are two clear opportunities to choose from. For those looking for exposure to a recovering Alberta economy without directly investing in oil, Canadian Western Bank is the play. For those looking east expecting the prosperity in the province of Quebec to continue, Laurentian Bank of Canada may just be the way to go.

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Fool contributor Ryan Goldsman has no position in any stocks mentioned.

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