The Canadian bank stocks are rolling into quarterly earnings season once again. Undoubtedly, expectations couldn’t be lower, with many of the bank stocks seemingly stuck in a multi-year rut. Though there have been notable outperformers who are ready to fly higher for investors again, many of the former top dogs are under considerable amounts of pressure.
Canadian bank stocks have faced the pressure
Indeed, the business of banking is not easy as provisions eat away at profitability, and various idiosyncratic issues (think TD Bank (TSX: TD) and the recent money-laundering aftermath) take a toll. In any case, it’s easy to give up on Canada’s top banks right here for some of the numerous names that have given investors something more to show for their years of investment.
Though it’s tough to tell when Canadian banking will get back up to full speed, I find it encouraging that some of the new leaders are already eclipsing their prior highs. Though each bank has its own unique challenges, I see things as getting brighter for the big banks from here.
In this piece, we’ll check out a top-performing bank that you probably didn’t have atop your watchlist this summer. The number-six Canadian bank has been very quietly rallying to new highs, leaving behind its much larger peers.
National Bank stock: A smaller bank that’s been a much bigger winner
Undoubtedly, the bank I speak of is National Bank of Canada (TSX: NA), which recently found itself at new all-time highs just shy of the $120 level. Over the past five years, NA stock has nearly doubled, while some of its larger, troubled, and more bloated rivals have delivered a fraction of the gains. For instance, shares of TD have returned a mere 11% over the same timespan. So, why the big differential? National Bank is an agile bank, and it’s moving in a fast but prudent manner.
With the bank bringing aboard Canadian Western Bank in what was a historic deal for the Canadian banking scene, National Bank is now a serious contender that could gain in market cap over the next decade. Recently, a big-name analyst on Bay Street stated that the Canadian Western Bank deal was referred to as a “strategic win” for National Bank. I couldn’t agree more.
For years, I’ve praised Canadian Western Bank as a misunderstood and severely depressed bank stock for deep-value investors to chase down. Though the regional bank was far from perfect, I think it’s a far better establishment in the hands of National Bank of Canada. Looking ahead, it will be very interesting to see National Bank continue to bolster its presence in Western Canada.
The bottom line
The Canadian Western Bank deal seems to accelerate progress on that front, as National Bank expands in a way that could nibble away at the heels of its so-called Big Five rivals.
At just 12.28 times trailing price to earnings, NA stock remains a cheap stock with the gains to show for it. And with a nice 3.71% dividend yield, investors will get paid while they wait for management to continue delivering across most fronts.
