The Canadian bank stocks have been lagging behind for quite some time now. Undoubtedly, the macro environment could continue to work against the bank stocks as we march into the midpoint of the year. Still, I expect the big banks will keep swimming against the tides to the best of their ability. Amid the rise of fintech firms, the big banks have had to take their digitization efforts seriously. Undoubtedly, the Canadian banks could continue to disrupt their disruptors as they bring their intriguing services further into the digital age.
When it comes to winning the business of younger audiences (think those in the Millennial and Gen Z cohorts), being up to date on tech is key. That means offering seamless experiences and providing financial services that just work without having to even pick up the phone and talk to someone. As we move further into the realm of generative artificial intelligence (AI), I expect Canada’s banks will continue to invest heavily in the technology to drive efficiencies further.
Without further ado, let’s check out two big Canadian banks that have invested quite a great deal in tech in recent years. With shares still trading miles below their all-time highs, perhaps the two plays are worth nibbling going into the second quarter.
TD Bank
TD Bank (TSX:TD) makes a pretty strong case for why it ought to be labelled as Canada’s most tech-savvy bank. The bank has not only been investing organically but pursuing intriguing acquisitions, like the purchase of Layer 6, an AI startup that could help TD offer a better experience for customers.
Undoubtedly, the Layer 6 deal didn’t just happen amid the early days of the ChatGPT boom. In fact, the deal happened more than six years ago, which, I believe, signifies TD was serious about AI innovation well before most other financial firms out there.
As TD continues to invest in digitization, look for the big bank to enhance its margins gradually over time while winning the business of young, tech-savvy consumers.
Royal Bank of Canada
Royal Bank of Canada (TSX:RY), Canada’s largest bank, is also no slouch when it comes to technological innovation. The company’s Aiden and NOMI products are intriguing AI innovations that may very well just mark the start of the firm’s focus on next-generation technologies. As more big banks look to startup tech and AI firms, don’t count on Royal Bank to pull its foot off the investment gas, even as its peers stay in cost-saving mode!
The stock is also quite cheap here at 12.65 times trailing price to earnings to go alongside a nice 4.06% dividend yield. Add the recent completion of its HSBC Canada deal into the equation, and I think Royal Bank of Canada stock could be poised for new highs, perhaps as soon as the back half of this year.
Better buy: TD or RY stock?
It’s a tough call, but I’d have to go with TD, given it’s been wheeling and dealing with AI many years ago. Further, TD is welcoming Royal Bank’s former head of Canadian and Asia-Pacific research. As the talent and tech wars heat up, it will be interesting to see where the banks go from here.
