3 Canadian Bank Stocks That Crushed Earnings

If you like bank stocks like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) then you will be pleased to learn they’re absolutely crushing earnings.

| More on:
Bank sign on traditional europe building facade

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

Earnings season is underway for Canadian banks, and so far, they have been crushing it. TD Bank (TSX:TD)(NYSE:TD), Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), and Royal Bank of Canada (TSX:RY)(NYSE:RY) have all released earnings for Q2, and all of them beat estimates. In fact, according to the Financial Post, all of the Bix Six banks beat estimates in the second quarter. In this article, I’ll take a “deep dive” look at the three just mentioned.

TD Bank beats

TD Bank grew its earnings by 144% year over year in the second quarter. A big boost was expected, because the year-before quarter included some major COVID-19 losses — specifically, losses due to an increase in provisions for credit losses (PCLs). Because of the COVID-19 pandemic, many of TD’s loans were perceived to have become riskier. So, the bank increased its PCLs in response. That resulted in lower earnings. But, over several quarters, the PCLs were lowered, which resulted in earnings rising. Today, TD is making more money than it did in the last quarter before COVID hit. In Q1 2020, TD earned $1.64 per share. In Q2 2021, it earned $1.99. So, even if we compare TD’s recent results to pre-COVID quarters, it was a winner.

Bank of Nova Scotia: A huge win

Bank of Nova Scotia (Scotiabank) is another Canadian bank that scored a big win in Q2. In the second quarter, it earned $1.88 per share, up from $1 — not as big a year-over-year increase as TD Bank, but still pretty good. The bank’s return on equity (ROE) also improved, going from 8.2% to 14.9%. The bank’s Wealth Management division did particularly well, with a 20% increase in assets under management (AUM). The more a wealth manager’s AUM goes up, the more fees it can collect, so this is one gain that could pay dividends well into the future.

Royal Bank of Canada: Flawless victory

Last but not least, we have Royal Bank of Canada.

Royal Bank of Canada beat expectations in the second quarter, with $4 billion in net income, up $2.5 billion. Net income was also up by $168 million from the prior quarter. Even pre-provision earnings were up 11%, which is very important, because it shows that the bank would have posted positive growth, even with COVID not in the equation. Speaking of which: RY’s earnings are also up 58% year to date, which shows that the bank is rapidly getting past the COVID hump that plagued it last year.

Royal Bank of Canada is Canada’s biggest bank for a reason. With an impeccable track record of stability, it is a solid dividend play that investors can count on. No, it doesn’t have the growth potential of a TD Bank, but it’s a different kind of bank stock; it’s a low-risk dividend play that provides just enough income to be better than most bonds. You won’t get rich buying stocks like RY, but you should enjoy steady, growing income.

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 Andrew Button owns shares of ROYAL BANK OF CANADA and TORONTO-DOMINION BANK. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Dividend Stocks

Happy family father of mother and child daughter launch a kite on nature at sunset
Dividend Stocks

Parents: Here’s Every Credit and Benefit You Can Claim From the CRA

Parents have it hard already, so make sure the CRA is doing everything for you by dishing out payments you're…

Read more »

edit Colleagues chat over ketchup chips
Dividend Stocks

3 Canadian Dividend Stocks to Buy and Hold for Life

These dividend-paying stocks have solid earnings base to support their payouts for decades.

Read more »

A golden egg in a nest
Dividend Stocks

Create a Million-Dollar TFSA With Just $1,000

If you have a TFSA, you can easily make a million-dollar portfolio by investing on a consistent basis in this…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

3 Canadian Stocks With Over 6% of Dividend Yield

Boost your passive income with three safe dividend stocks.

Read more »

TFSA and coins
Dividend Stocks

TFSA Pension: 2 TSX Dividend Stocks to Buy Now and Hold for Decades

These top TSX stocks pay great dividends and look cheap to buy right now for a TFSA retirement fund.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

TFSA Dividend Income: 2 TSX Stocks to Buy on the Pullback

These TSX stocks look oversold and pay attractive dividends that continue to grow.

Read more »

oil tank at night
Dividend Stocks

1 Top TSX Energy Stocks for Summer 2022

TSX energy stocks have tanked recently, but they could enjoy a nice summer rally. Here's one top stock I'm eyeing…

Read more »

TIMER SAYING TIME FOR ACTION
Dividend Stocks

Market Correction: 2 Cheap TSX Dividend Stocks to Buy Now for a Self-Directed RRSP

These top TSX dividend stocks look cheap right now for a self-directed RRSP focused on total returns.

Read more »