2 Banking Bets That Could Make You Rich

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and one other bank could make your TFSA rich!

| More on:
Piggy bank next to a financial report

Image source: Getty Images.

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

When you think of Canadian bank stocks, the last thing you think of is getting rich. Many of them are established behemoths that have been around for over a century. When it comes to the TSX, the banks are among the largest of institutions, and, as you may know, the bigger the business, the harder it is to bag multi-bagger returns.

What the Big Six banks lack in growth potential relative to smaller, more agile firms, they make up for in the width of their moats. There are massive barriers to entry when it comes to banking, and as the old banks of yesteryear continue to embrace innovative, new technologies, their moats (and margins) will only stand to widen, even as up-and-coming digital-only banks pick up traction.

Without further ado, here are two timely banks that could make you big money at their current valuations.


The banks provide a means to grow wealth at an above-average rate over time — big dividends, dividend raises, and all the sort. But unless you can nab shares at a huge discount to their intrinsic value, it’s tough to make colossal money from the banks.

There is one bank that I believe is trading at a huge discount amid the recent macro headwinds faced by the broader industry, and that bank is CIBC (TSX:CM)(NYSE:CM), the most punished Big Five bank of late.

After the recent post-Q2 damage, CIBC stock trades at 8.5 times forward earnings, 1.3 times book, 2.5 times sales, and 4.2 times cash flow. For a company the calibre of CIBC, the valuation is far too cheap. Not only is the name the close to the cheapest it’s been in recent memory with a very bountiful 5.5% dividend yield, but the name is trading with extremely pessimistic expectations with regards to the fate of the Canadian housing market. I think these concerns are overblown, and investors who are willing to go against the grain could have a chance to ride a big bounce.


Here’s a mid-cap bank that you’ve probably never heard of because of its mere $152 million market cap and the fact that the company changed its name from Pacific & Western Bank back in 2016.

VersaBank (TSX:VB) is a digital-only bank that’s arguably one of the most tech-savvy financial institutions in Canada. The lack of physical branches allows VersaBank to offer a better value proposition for its depositors. With a solid book of loans, a strong virtual focus, and intriguing technologies that beg for investor attention (like VersaVault for the crypto fanatics out there), I think VersaBank is evolving into a disruptive force.

Although VersaBank is technically a chartered bank, I like to think of it as a fintech play. Being an electronic branchless bank comes with its fair share of challenges. To combat such challenges, the company needs to continue developing new technologies and continuously better rates over the competition to inspire depositors to give it a chance over the “unstoppable” Big Six institutions that have far deeper pockets.

Over the past year or so, VersaBank has outperformed its bigger brothers, and despite the recent run, the stock still trades at just over nine times earnings and 2.9 times sales.

VersaBank has a few tricks up its sleeves, and if you’re in the market for a fintech play that could become a multi-bagger, you may want to consider picking up shares at just $7 and change.

Foolish takeaway

Contrary to popular belief, banks can make you “rich.” If you buy shares at big discounts on the dip or pick up shares of an under-the-radar up and comer, you can maximize your chances. Of course, the higher potential reward comes with more volatility relative to the Big Six basket of blue chips.

Stay hungry. Stay Foolish.

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 Joey Frenette owns shares of CANADIAN IMPERIAL BANK OF COMMERCE.

More on Dividend Stocks

Canadian stocks are rising
Dividend Stocks

3 Ways to Invest in Canadian Real Estate Under $20

Real estate can be a great way to make passive income, but you certainly don't have to invest a lot…

Read more »

grow dividends
Dividend Stocks

TFSA Wealth: 2 Oversold Canadian Stocks for a Retirement Fund

These top TSX divided stocks look attractive today for TFSA investors.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Create $1,487 in Passive Income From a Top TSX Dividend and Growth Stock

This top growth stock on the TSX today could bring in almost $1,500 in passive income and triple your investment…

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Renters Will Rise in Number vs. Homebuyers in 2022

The greater majority of Canadian renters doubts their ability to purchase a home in 2022 due to surging inflation and…

Read more »

Man holding magnifying glass over a document
Dividend Stocks

West Fraser Stock: A Sneaky Growth Stock No One Talks About

West Fraser (TSX:WFG)(NYSE:WFG) stock has been a sneaky growth stock when it comes to its dividend.

Read more »

Dividend Stocks

Inflation Investing: 2 Top TSX Dividend Stocks to Buy Now

TFSA income investors can get dividend yields of better than 6% to help offset the impacts of high inflation.

Read more »

Canadian Dollars
Dividend Stocks

Got $1,000? Invest it in Real Estate

If you've got an extra $1,000, you should check out cheap REITs like Allied Properties (TSX:AP.UN) for juicy income.

Read more »

Community homes
Dividend Stocks

Real Estate: 2 Top Dividend Aristocrats to Own Today

The recent correction in the real estate sector has made several real estate stocks like these two attractive to income-seeking…

Read more »