We talk a lot about the biggest banks in Canada, but really, all of them are enormous. And that’s why it might be a better opportunity to look beyond the top two and instead discuss Bank of Nova Scotia (TSX:BNS) and Canadian Imperial Bank of Commerce (TSX:CM). With both providing hefty dividend yields and growth, which is the better bank buy?
Scotiabank stock
First let’s go over Scotiabank stock. Scotiabank stock has long been known for its investment into emerging markets, which has provided investors with a strong growth opportunity. The bank has a significant presence in emerging markets, particularly in Latin America, where it has established itself as a key player. Emerging markets often offer higher growth potential compared to more mature markets, which can benefit Scotiabank’s bottom line.
However, this investment in emerging markets also exposes it to geopolitical risks such as political instability, regulatory changes, and currency fluctuations. Events such as trade disputes or political unrest in key markets could negatively impact the bank’s operations and financial performance.
So, let’s see how the company has been performing from these investments and during this period of economic uncertainty. Scotiabank stock reported net income of $2.12 billion during the third quarter of 2023, with diluted earnings per share (EPS) at $1.72. By the fourth quarter, net income shrunk to $1.385 billion, with diluted EPS at $1.02. However, this recovered to net income of $2.2 billion, with diluted EPS at $1.68. So, the stock recovered this year, with second-quarter earnings on the way.
CIBC stock
Now, let’s turn our attention to CIBC stock. In this case, CIBC stock has a diversified business model and leading market position and has been in a leading market position for years now. The company has also shifted towards focusing on digital innovation as well as client retention. This has seen a lot of positive movement in the last few years.
However, the company is quite sensitive to poor economic movement — especially given its exposure to credit risks from its loan portfolio, specifically the Canadian housing market. CIBC primarily operates in Canada, exposing it to geopolitical risks such as political instability, regulatory changes, and currency fluctuations. Events like trade disputes, economic sanctions, or political unrest can negatively impact the bank’s operations and financial performance.
So, again, have we seen this during the last few quarters? CIBC stock reported $5.85 billion in revenue, $1.43 billion in net income, and diluted EPS of $1.52 during the third quarter. The fourth quarter shrunk as well, like Scotiabank stock, hitting $5.844 billion in revenue, $1.483 billion in net income for an increase, and $1.57 billion in diluted EPS. Then, there was a surge in the first quarter at $6.22 billion in revenue, $1.728 billion in net income, and $1.81 in diluted EPS.
Bottom line
Both of these companies offer strong dividend yields, growth, and likely long-term income. But if you want a company that’s demonstrating more growth in this difficult environment, it’s clear that CIBC stock has already seen positive momentum. Meanwhile, Scotiabank stock could continue to be held back as the markets and economy look to improve.
