3 Top TSX Bank Stocks You Can Buy Right Now

Canadian banks are likely to make a strong comeback in 2021 on an expected improvement in economic activities.

| More on:
edit Four girl friends withdrawing money from credit card at ATM

Image source: Getty Images

I see an opportunity to buy into top TSX bank stocks, as Canadian banks are likely to make a strong comeback in 2021 on an expected improvement in economic activities. I believe the vaccine distribution could lead to an uptick in economic revival and drive loans and deposit volumes. 

As the net interest income (NII) of the banks rises on loan book expansion, the reduction in loss provisions and expense management is likely to lead to improved earnings.  

Here are the top three TSX-listed bank stocks that could outperform the benchmark index in the coming quarters. 

Royal Bank of Canada

Speaking of top bank stocks, Royal Bank of Canada (TSX:RY)(NYSE:RY) should be on your buy list. The bank’s industry-leading market share, strong balance sheet, and diversified earnings sources position it well to benefit from the economic recovery.  

With the improvement in loans and deposit volumes, Royal Bank of Canada’s NII could improve, despite the low-interest-rate environment. Meanwhile, the expected increase in non-interest income, operational efficiency, and lower provisions are likely to support profitability. 

Royal Bank of Canada’s net income improved both sequentially and on a year-over-year basis during Q4. Moreover, its pre-provision, pre-tax (PPPT) earnings also improved during the last reported quarter. 

Notably, Royal Bank of Canada is also known for robust dividend payments. The bank has raised its dividends at a CAGR (compound annual growth rate) of 7% in the past 10 years. Meanwhile, it offers a decent dividend yield of 4.1%. 

Bank of Montreal 

Bank of Montreal (TSX:BMO)(NYSE:BMO) looks attractive investment, thanks to the expected improvement in the operating environment. Its loans and deposits are likely to improve. Meanwhile, its bottom line could benefit from lower provisions and improving efficiency ratio. 

The bank impressed with its recent financial performance. Its provision for losses improved sequentially. Meanwhile, its efficiency ratio improved by 160 basis points. 

While the expected improvement in its operating and financial performance is likely to drive its stock higher, its low valuation makes it appealing. Bank of Montreal trades at a significant discount when compared to peers. Moreover, it offers a dividend yield of 4.4%. 


Like Bank of Montreal, Scotiabank (TSX:BNS)(NYSE:BNS) also looks attractive on the valuation front. Its P/B ratio remains about 20% lower than the peer group average. Meanwhile, the uptick in credit demand and improvement in the economy is likely to give a significant boost to Scotiabank stock, thanks to its diversified exposure to high-growth markets. 

Besides offering value and growth, Scotiabank is known for its stellar dividend payments. Scotiabank’s dividends have grown at a CAGR of 6% over the past decade. Meanwhile, its high-quality earnings base suggests that the bank would continue to increase its dividends further in the coming years. 

Scotiabank’s growing scale, strong credit quality, and market share gains in the core market positions it well to deliver healthy earnings in the coming years. Meanwhile, Scotiabank’s investors could continue to gain from its high yield of 5.3%.

Bottom line

The economic recovery is likely to give a significant boost to these bank stocks. Meanwhile, investors are expected to benefit from the consistent dividend payments and high yield amid a low-interest-rate environment.

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Bank Stocks

Modern buildings in business district
Bank Stocks

TD and CIBC Stock: 2 Top Banks to Buy for Big Yields

TD Bank (TSX:TD)(NYSE:TD) stock is a dividend juggernaut that's a must-buy for its cheap yield.

Read more »

retirees and finances
Energy Stocks

These 3 Stocks Can Help Make You Richer by Retirement

Future retirees can be rich in their sunset years with the help of three distinguished dividend-payers on the TSX.

Read more »

Female hand holding piggy bank. Save money and financial investment
Dividend Stocks

2 Safe Dividend Stocks to Beat Inflation

Canadian investors, young and old alike, can cope with or even beat inflation by owning two safe dividend stocks.

Read more »

Mature financial advisor showing report to young couple for their investment
Bank Stocks

Retire Young: How to Turn a TFSA or RRSP Into $1 Million

Here’s how you can turn your TSFA or RRSP into $1 million or more to plan your early retirement.

Read more »

falling red arrow and lifting
Dividend Stocks

Why Bank of Nova Scotia (TSX:BNS) Stock Fell to Two-Year Lows Last Week

Should you buy BNS stock at such depressed levels?

Read more »

close-up photo of investor Warren Buffett
Dividend Stocks

The Best Warren Buffett Stocks to Buy With $300 Right Now

One way to choose good stocks to invest in is to see what investors like Warren Buffett, with a time-tested…

Read more »

edit Back view of hugging couple standing with real estate agent in front of house for sale
Bank Stocks

Why goeasy (TSX:GSY) Stock Fell 9.5% in September

Despite a challenging environment, I am bullish on goeasy due to its solid track record, healthy long-term growth prospects, and…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Stocks for Beginners

3 TSX Stocks You’ll Wish You Bought at These Prices

Stocks are currently trading at unbelievable discounts. Here are three TSX stocks you’ll wish you had bought at these prices!

Read more »