First-quarter 2020 earnings for Canada’s top banks will be made available to investors starting this month. The S&P/TSX Composite Index has surged to all-time highs in recent months. Financials are the heaviest weighted sector on the TSX. Interestingly, many of Canada’s top banks have failed to generate significant momentum during this run.
Markets have been hit by volatility due to the coronavirus scare and the subsequent decline in oil prices, but confidence has returned in early February. With that in mind, today, I want to look at two top Canadian bank stocks that offer great value in early February. Not only that, but these equities also boast top-end income in their sector. Let’s dive in.
Canadian Imperial Bank of Commerce
Shares of Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) have dropped 3% over the past three months as of close on February 5. CIBC is the fifth largest of the Big Six banks. The bank bet big on housing growth in Canada’s major metropolitan areas. A housing correction in 2017 and 2018 was a setback for CIBC, and it is not longer the leader it once was in mortgage lending.
Investors can expect to see CIBC’s first-quarter results in late February. The bank has already pledged to work on bolstering its mortgage lending in 2020. This may be good timing, as the Canadian housing sector showed healthy signs of a rebound in 2019. In January, CIBC announced layoffs, as it aims to boost its efficiency this year.
CIBC has boasted solid value since shares dipped following its Q4 earnings release. The stock last possessed a price-to-earnings (P/E) ratio of 9.7, the best among its peers, and a favourable price-to-book (P/B) value of 1.3. CIBC carried an immaculate balance sheet into 2020. It last paid out a quarterly dividend of $1.44 per share, which represents a strong 5.2% yield.
Scotiabank (TSX:BNS)(NYSE:BNS) stock has dropped 2.8% over the last three months. This bank is often called “The International Bank” because of its large global footprint, especially concentrated in Latin America. The region struggled in 2019, but it is expected to see improved economic activity over the next two years, according to analysis from the Spanish multinational BBVA.
In late October, I’d recommended Scotia, citing its solid dividend. Scotia last paid out a quarterly dividend of $0.9 per share, representing a 4.9% yield. This is a mark only beat out by CIBC among its peers.
The bank projected that its domestic operations would contribute a greater proportion of revenue and net earnings in the 2020 fiscal year. However, it will continue to lean on its global banking operations. Scotia is expected to release its first-quarter 2020 results on February 25.
Shares of Scotia last possessed a P/E ratio of 10.9 and a P/B value of 1.4. Once again, this is a value mark, which is only beaten out by the first stock I covered in this article. Scotia also boasts a flawless balance sheet.
These bank stocks look like great discounts to pursue in early February.
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. The Motley Fool recommends BANK OF NOVA SCOTIA.