The Motley Fool

2 Quebec-based Bank Stocks to Pick Up Before the End of 2018

The economy has taken centre stage during the Quebec provincial election. Citizens will head to the polls on October 1, and the ruling party has worked hard to brandish its economic record ahead of the vote.

Quebec has reported some of the lowest employment rates since the 1970s, and its growth has managed to keep pace with some of the top provincial performers, including Ontario and British Columbia.

Quebec has also benefited from a stable housing market. The Montreal metropolitan area has seen a steady increase, though without the kind of overheating that investors have witnessed in other major areas like Vancouver and Toronto.

Today we’ll look at two Quebec-based bank stocks that investors should consider adding before the end of the year.

National Bank (TSX:NA)

National Bank is a Montreal-based bank and smallest of the Big Six banks in Canada. Shares were up 3.8% in 2018 as of early afternoon trading on September 20, and the stock is up 13% year over year. National Bank released its third-quarter results on August 29.

Net income rose 10% to $569 million in the quarter and diluted earnings per share climbed 11% to $1.52. Its Personal and Commercial Banking segment posted net income of $248 million, which was up 6% from the prior year.

Personal lending posted 3% growth on the back of the mortgage book, and commercial lending was up 8% year over year.

Its other major segments also posted growth in the quarter. Wealth Management, Financial Markets, and U.S. Specialty Finance and International segments posted increases in net income of 22%, 8%, and 6%, respectively.

The board of directors also announced a quarterly dividend of $0.62 per share, representing a 3.7% dividend yield.

Laurentian Bank (TSX:LB)

Laurentian Bank stock had dropped 21.7% in 2018 as of early afternoon trading on September 20. The stock has suffered a precipitous decline since late 2017, losing nearly $20 in value, as an internal mortgage underwriting crisis has frustrated the share price. Laurentian released its third-quarter results on September 4.

The bank declared that it had completed its mortgage loan portfolio review, and CEO Francois Desjardins said that the situation with CHMC and the third-party purchaser had been resolved. This comes as a relief after the saga had hurt its standing since late 2017.

In the third quarter, adjusted net income fell 1% to $59.4 million and adjusted diluted earnings per share dropped 18% to $1.34. Loans to business customers increased 14% year-over-year, which propelled net interest margin in the quarter to 1.77%. Residential mortgage loans fell $1 billion since October 31, 2017 to $17.5 billion.

The bank has reoriented its lending strategies to focus on higher yield commercial loans to optimize product mix. Laurentian also opted to solely originate residential mortgages through the branch network since November 1, 2017.

The bank also offers a quarterly dividend of $0.64 per share, representing an attractive dividend yield of 5.7%. With its mortgage woes seemingly behind it and commercial lending growth looking solid, Laurentian is a good target for those seeking income in the fall.

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 of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.