Better Buy Right Now: National Bank of Canada vs. Laurentian Bank of Canada

National Bank of Canada (TSX:NA) and Laurentian Bank of Canada (TSX:LB) have entered December on two opposing notes.

| More on:
The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The unemployment rate in Quebec registered at 5.4% in November, as the province added over 16,000 jobs. The province now boasts the lowest unemployment rate in Canada. In a late October article, I’d covered the impressive economic growth in Quebec and focused on several companies that were benefiting from the trend.

Today, we are going to look at two Quebec-based banks that have gone in different directions since releasing quarterly financials. Let’s determine which stock investors should buy heading into 2018.

National Bank

National Bank of Canada (TSX:NA) is a Montreal-based commercial bank and the sixth-largest of Canada’s major banks. Shares of National Bank have climbed 17.3% in 2017 as of close on December 7. In a June article, I’d discussed why National Bank was a great buy, while it was priced under $54. The stock hit $64 at close on December 7. The bank has posted an impressive string of earnings. In the fourth quarter, it hiked its dividend to $0.60 per share, representing a 3.7% dividend yield.

National Bank released its fourth-quarter results on December 1. The bank reported net income of $525 million, which was a 71% increase from $307 million in the fourth quarter of 2016. For the full fiscal 2017, National Bank posted net income of $2.02 billion in comparison to $1.25 billion in the prior year.

The bank reported growth in each of its core business segments in the quarter. Personal and commercial banking experienced 25% growth in net income and wealth management increased by 26%. For the full year, retail banking reported 66% growth in net income.

Laurentian Bank

Laurentian Bank of Canada (TSX:LB) is a Montreal-based regional bank that services Quebec. Its stock has fallen 2% in 2017. The stock plummeted 10% after reaching an all-time high of $62.90 after an audit revealed $89 million worth of mortgages with “client misrepresentations.” However, Laurentian has played down the finding as a documentation issue rather than a systemic problem.

Laurentian released its fourth-quarter results, which contained the report on the audit, on December 5. The bank posted adjusted net income of $230.7 million, or $6.09 per share, representing 23% and 7% year over year increases, respectively. Loans to business customers rose 22% from the prior year, while residential mortgage loans through brokers and advisors were also up 22%.

The bank raised its dividend to $0.63 per share, representing a 4.4% dividend yield.

Which should you buy?

National Bank will look to build on its strong 2017, but it could face a number of headwinds in 2018. New OSFI mortgage rules are expected to slow Canada housing early next year. In early 2017, National Bank set a goal to become a top three investment bank in Canada. NAFTA renegotiations have continued to sour between the U.S., Mexico, and Canada, and the Bank of Canada estimated that Canada could see foreign investment dip if the agreement is scuttled.

I like National Bank as a long-term hold, but right now Laurentian Bank is an appealing buy. Its fourth-quarter earnings would have been stellar were it not for the results of the audit. The bank began an overhaul of its internal processes in November, and should still benefit from a Quebec housing market that has been highly stable heading into 2018.

Should you invest $1,000 in Crombie Real Estate Investment Trust right now?

Before you buy stock in Crombie Real Estate Investment Trust, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Crombie Real Estate Investment Trust wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Investing

protect, safe, trust
Dividend Stocks

How I’d Allocate $1,000 in Defensive Stocks in Today’s Market

These defensive stocks are outperforming the broader market despite economic uncertainty, providing stability, income, and growth.

Read more »

Piggy bank and Canadian coins
Dividend Stocks

Where I’d Invest My Savings in the TSX Today

These two TSX stocks would be my first picks if I were putting more money into the stock market today.

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

How I’d Adjust My Portfolio to Benefit from Canadian Dollar Movements

TSX stocks benefit from Canadian dollar movements, although the loonie will be under pressure in 2025 due to trade uncertainty.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Monday, April 7

With a 6.3% weekly loss, the TSX just posted its steepest percentage decline in a single week since June 2022.

Read more »

Stocks for Beginners

Dip Buyers Could Win Big: The Best Canadian Stocks to Buy Now

These two growth stocks have taken hits recently, but their fundamentals remain strong, and their growth prospects are intact.

Read more »

A bull and bear face off.
Stock Market

Bear Market Bargains Emerge as Recession Stocks Return

If you want a deal, then go to the best stocks during a recession market dip.

Read more »

Canadian Red maple leaves seamless wallpaper pattern
Dividend Stocks

5 Canadian Dividend Stocks to Buy and Hold for the Next 20 Years

These Canadian stocks have paid dividends for decades, making them reliable investments to generate regular passive income.

Read more »

An investor uses a tablet
Stocks for Beginners

The Smartest Canadian Stock to Buy With $250 Right Now

Are you looking for the smartest Canadian stock to buy right now? Consider this gem and avoid market volatility.

Read more »