The S&P/TSX Composite Index rose 131 points on Monday, March 20. Markets have been rattled after the collapse of Silicon Valley Bank and Signature Bank in the United States. Moreover, the Swiss giant Credit Suisse appeared to be on the brink of its own catastrophe before it was rescued in an acquisition by its chief national rival UBS Group.
The Big Six Canadian banks demonstrated their resilience in the face of the Great Recession and the COVID-19 pandemic, and so far, they have looked robust, as central banks have pursued an aggressive monetary police change. Despite that, Canadian bank stocks have been hit hard over the past two weeks. BMO Equal Weight Banks ETF has dipped 9.5% month over month as of close on March 20.
Today, I want to look at three dirt-cheap bank stocks that are well worth snatching up on the dip in this volatile environment. Central banks across the developed world have already laid out plans to inject liquidity into global markets to combat this bout of banking turbulence. It remains to be seen how they will handle interest rates in the coming months. Regardless, I still love Canadian banks for the long haul.
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This dirt-cheap bank stock is still one of my top value picks
Scotiabank (TSX: BNS) is the first Canadian bank stocks I’d look to snatch up on the dip in the second half of March. It is sometimes called “The International Bank” because of its significant global reach, particularly in Latin America. Its shares have dropped 8.4% over the past month.
In the first quarter (Q1) of 2023, Scotiabank delivered adjusted net income of $2.36 billion, or $1.85 per diluted share — down from $2.75 billion, or $2.15 per diluted share, in Q1 fiscal 2022. However, its International Banking and Global Banking and Markets segments delivered net income growth of 20% and 22%, respectively, compared to the previous year. Like its peers, Scotiabank boasts a phenomenal balance sheet and an impressive history of dividend growth.
Shares of this bank stock possess a favourable price-to-earnings (P/E) ratio of 9.1 as of writing. Better yet, it offers a quarterly dividend of $1.03 per share. That represents a tasty 6.2% yield.
Don’t sleep on BMO, as we look to the end of the winter season
Bank of Montreal (TSX: BMO) is the third largest of the Big Six Canadian banks. It boasts a significant footprint in the United States, second only to TD Bank’s southern retail empire. BMO stock has plunged 11% month over month. Its shares have declined 23% compared to the prior year.
The bank released its Q1 fiscal 2023 earnings on February 28. BMO posted adjusted net income of $2.27 billion — down from $2.58 billion in Q1 2022. Meanwhile, provision for credit losses expanded to $217 million compared to $99 million in the previous year.
This bank stock last had a very attractive P/E ratio of 7.3 as of writing. Moreover, it offers a quarterly dividend of $1.43 per share, which represents a solid 4.8% yield.
One more undervalued bank stock to grab right now
Canadian Imperial Bank of Commerce (TSX: CM) is the third undervalued bank stock I’d look to snatch up on the dip in late March. This is the fifth largest of the Big Six Canadian banks by market cap but still worthy of a long-term hold. Shares of CIBC have dropped 7.5% over the past month. The stock is still up 2.4% in the year-to-date period.
In Q1 2023, CIBC delivered revenue growth of 8% to $5.92 billion. However, adjusted net income was reported at $1.84 billion, or $1.94 per diluted share — down 3% and 5%, respectively, compared to the Q1 2022. This bank stock possesses a favourable P/E ratio of 11 as of writing. Meanwhile, CIBC offers a quarterly dividend of $0.85 per share, representing a super-strong 5.9% yield.
