Canadian banks are some of the strongest financial institutions in the world. They’re also some of the largest. Even when compared to our United States neighbours, Canadian banks still take the top positions in terms of market cap.
One of those banks would include Toronto-Dominion Bank (TSX:TD). TD stock isn’t just one of the largest banks in Canada; it’s also one of the top 10 in the United States, and it’s growing all the time.
Yet, during this period of high interest rates, TD stock has been seeing loan repayments drop. This has left investors concerned about whether the company will rebound as quickly as hoped. So, let’s look at what investors should consider before buying TD stock.
Bull case
For those considering TD stock on the TSX today, let’s first look at the bull case. First off, it cannot be denied that, overall, TD stock has consistently reported profitability and dividend payouts. The company is well known for investors seeking reliable income, with TD stock remaining attractive with a 5.16% yield as of writing.
The bank is also a market leader and is tied for first as the largest bank in Canada. It continues to hold a strong brand reputation and a dominant market share. This leadership offers some stability and resilience, even in the face of economic downturns.
What’s more, TD stock has delivered various opportunities that could lead to growth. This includes rising interest rates as well as an expanding economy. Furthermore, the company is investing more in digital banking solutions, which could provide more efficiency as well as customer appreciation.
Bear case
But there are some issues that TD stock has to contend with. While higher interest rates can benefit banks in the short term, it can also lead to slower economic growth. This can lead to a lower demand for loans — something that TD stock depends on.
What’s more, the company had a deal fall through recently when the bank’s First Horizons acquisition was put to a halt. This came as large acquisitions from foreign institutions in the United States became a no-no.
Instead, TD stock has looked elsewhere, in particular to Indian bank HDFC to attract students looking to study in Canada. It seems that banks are seeking out the potential of high-earning newcomers to Canada, and TD stock has certainly jumped on this trend. Yet it’s far from assured to provide a new income stream for the bank.
Bottom line
All in all, TD stock still looks a bit risky when compared to the other banks on the TSX today. The bank is still down 3% in the last year, and, despite some improvements in the short term, it still has a long way back to former 52-week highs. It now offers a 5.16% dividend yield, and that could certainly be a good deal for long-term investors. But if you’re looking for the best bank to buy on the TSX today, I wouldn’t say it’s TD stock, even at these values. There are still too many issues in the way for a bank once known for high growth and even higher share prices.
