The Motley Fool

3 Top TSX Bank Stocks You Can Buy Right Now

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.

Are you fan of dividend stocks?

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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.

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.