The Motley Fool

Which Quebec-Based Bank Is the Better Buy Today?

Toward the end of 2018 I discussed the pleasant surprise that was the Quebec economy and focused on two of the strongest banks in the region. Today I want to revisit one of those banks and compare it with another Montreal-based bank with a much larger national and international footprint. Which bank stock is the better buy today? Let’s find out.

National Bank (TSX:NA)

National Bank is the smallest of the Big Six Canadian banks. However, its footprint is significant in its home province of Quebec. Shares have climbed 9.9% in 2019 as of close on June 4. The bank released its second-quarter 2019 results on May 30.

For the second quarter in a row, National Bank reported net income of $558 million, up 2% from Q2 2018. Diluted earnings per share posted 5% growth to $1.51. In the year-to-date period, net income has increased 1% to $1.11 billion and diluted EPS has climbed 4% to $3.01.

National Bank reported net income of $234 million in its Personal and Commercial Banking segment, up 9% from the prior year. Personal lending rose 4% year over year and commercial lending posted 9% growth. Unlike its peers, however, National Bank reported a disappointing quarter in its Financial Markets segment. Net income fell 16% year-over-year to $160 million largely due to lower revenues from the global markets revenue category.

The bank elected to raise its quarterly dividend in the face of a lukewarm quarter. National Bank now offers a quarterly dividend of $0.68 per share, a 4.6% hike, representing an attractive 4.4% yield. National Bank’s forward P/E of 10 makes it a value play relative to its peers right now.

Bank of Montreal (TSX:BMO)(NYSE:BMO)

Bank of Montreal is the fourth-largest Canadian bank. Shares have climbed 11.9% in 2019 as of close on June 4. The stock is still down 1% from the prior year. In early May I discussed why BMO was poised for improved results in the second quarter, but cautioned investors that some of its technicals put the stock in pricey territory.

BMO released its second-quarter 2019 results on May 29. The bank reported adjusted net income of $1.52 billion, up 4% from the prior year. Adjusted earnings per share rose 5% to $2.30. Net revenue also increased 8% to $5.65 billion.

Adjusted net income in Canadian Personal and Commercial Banking rose 5% year-over-year to $615 million on the back of strong revenue growth. In what has become a consistent trend, BMO’s U.S. P&C Banking segment was the strongest point, reporting adjusted net income of $417 million. This was up 16% from Q2 2018 bolstered by good revenue growth and lower provisions for credit losses.

BMO announced a 7% year-over-year increase in its quarterly dividend to $1.03 per share, representing a 4.1% yield. BMO stock also boasts a forward P/E of 10. Its post-earnings bump briefly put the stock into technically oversold territory in late May and it currently has an RSI of 38 as of this writing.

It is a close call between these two, but I like BMO’s value after its post-earnings dip.

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you. Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

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.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.