Which Quebec-Based Bank Is the Better Buy Today?

National Bank of Canada (TSX:NA) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are two of the smallest of the Big Six banks. Both also offer some of the best value right now.

| More on:
Bank sign on traditional europe building facade

Image source: Getty Images

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.

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.

More on Bank Stocks

hand using ATM
Bank Stocks

Better Stock to Buy Now: TD Bank or Scotiabank?

As far as the large Canadian banks are concerned, let's dive into two of the best and see which one…

Read more »

edit Woman calculating figures next to a laptop
Bank Stocks

Should You Load Up on TD Stock Now?

TD stock is near its lowest price in three years. Is TD Bank now oversold?

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Bank Stocks

TD Stock’s Dividend Yield Hits 5.4%: Is It Finally Time to Buy?

While TD Bank stock trades sideways, it's a good time to lock in a higher dividend yield.

Read more »

Hands shaking over a business deal
Bank Stocks

National Bank to Buy Canadian Western Bank: What Investors Need to Know

National Bank of Canada (TSX:NA) is acquiring Canadian Western Bank (TSX:CWB) in a historic deal for Canadian banks.

Read more »

Dice engraved with the words buy and sell
Bank Stocks

TD Bank Stock: Buy, Sell, or Hold at the 12-Month Low?

TD is near its 12-month low. Is more downside on the way?

Read more »

Person holds banknotes of Canadian dollars
Bank Stocks

If the Loonie Falls Against the U.S. Dollar, This Canadian Stock Could Gain

TD Bank (TSX:TD) stock finally looks like a decent investment as the loonie weakens further against the U.S. dollar.

Read more »

hot air balloon in a blue sky
Bank Stocks

Prediction: These 2 Canadian Bank Stocks Are Next in Line to Pop

Two Canadian bank stocks, one big and one small, are likely to pop following their Q2 fiscal 2024 results and…

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Bank Stocks

Should You Buy TD Bank Stock for its 5.3% Dividend Yield?

Down 29% from all-time highs, TD Bank stock offers you a tasty dividend yield in 2024.

Read more »