The S&P/TSX Capped Financial Index closed in the red on Friday, May 19. Canada’s top banks have started to unveil second-quarter earnings for fiscal 2023. Higher interest rates and a shaky economic environment have put pressure on the country’s top financial institutions. Today, I want to explore which is the better buy between one of the Big Six banks and a regional bank situated in Western Canada. TD Bank (TSX: TD) and Canadian Western Bank (TSX: CWB) are the bank stocks I want to dive into today. Let’s jump in!
The case for TD Bank ahead of its second-quarter earnings report
TD Bank is the second largest of the Big Six Canadian bank stocks by market cap. Meanwhile, it is also the second-largest stock on the TSX by the same measure. Shares of this bank stock have dropped marginally month over month as of close on May 19. The stock has slipped 6.1% so far in 2023.
This top bank is expected to release its second quarter fiscal 2023 earnings in the afternoon on Thursday, May 25. In the first quarter of fiscal 2023, TD delivered adjusted net income of $4.2 billion, or $2.23 per diluted share – up from $3.8 billion, or $2.08 per diluted share, in the first quarter of fiscal 2022.
The bank benefited from net income growth of 7% to $1.7 billion in its Personal and Commercial Banking segment. Moreover, P&C Banking hit record revenues of $4.6 billion on the back of improved margins and volume growth. TD Bank’s substantial United States Retail segment achieved record adjusted net income of $1.7 billion – up 31% from the previous year. However, TD’s Wealth Management and Wholesale Banking segments both suffered earnings setbacks compared to Q1 2022.
Shares of this bank stock currently possess a favourable price-to-earnings ratio of 9.9. Moreover, TD Bank offers a quarterly dividend of $0.96 per share. That represents a solid 4.6% yield.
Here’s why Canadian Western is worth your attention right now
Canadian Western Bank is an Edmonton-based regional bank that provides personal and business banking products and services primarily in Western Canada. However, it has branched out in Eastern Canada in recent years. This bank stock has increased 4.9% over the past month. That has pushed its shares into the black in the year-to-date period.
Investors can expect to see Canadian Western Bank’s second batch of fiscal 2023 results as markets open on Friday, May 26. In the first quarter of fiscal 2023, the bank posted net income growth of 39% to $94 million. Meanwhile, adjusted earnings per share (EPS) climbed 16% year over year to $1.02. This bank also benefited from higher net interest income as the Bank of Canada (BoC) pursued an aggressive rate-tightening policy. Net interest income growth powered annual loan growth of 9%.
This bank stock last had a very attractive P/E ratio of 7.3. It offers a quarterly dividend of $0.32 per share, which represents a strong 5.1% yield.
Which bank stock is the better buy today?
TD Bank is always a promising long-term hold, but for the present I’m liking Canadian Western Bank. The regional bank stock boasts an excellent balance sheet, terrific value, and a stronger dividend than its Big Six counterpart.
