Canadian bank stocks are proving once again why they’re some of the most reliable investments on the TSX. Over the last year, the financial sector, especially bank stocks, has outpaced the broader market, as easing inflation, an improved borrowing environment, and strong housing market activity continued to boost investors’ sentiments.
With their reliable dividends and a decades-long history of weathering economic volatility, I expect Canadian banks to continue rewarding investors in 2025. Let’s take a look at two Canadian bank stocks that are top buys in January 2025.
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Royal Bank stock
Undoubtedly, Royal Bank of Canada (TSX:RY) could be one of the most reliable investments in 2025. After rallying by 31.2% in the last year, RY stock currently trades at $175.50 per share with a market cap of $248.3 billion, making it the largest bank in Canada. And its dependable 3.4% annualized dividend yield, with quarterly payouts, continues to attract income-focused investors.
In its fiscal 2024 (ended in October), Royal Bank pleasantly surprised investors by achieving a record net profit of $16.2 billion, reflecting an 11% YoY (year-over-year) increase. Its adjusted net profits for the year of $17.4 billion also highlight the bank’s exceptional performance, partly supported by its strategic acquisition of HSBC Bank Canada. This acquisition added $453 million to Royal Bank’s profits and boosted its dominance in the Canadian banking sector.
As the largest Canadian bank continues to focus on diversified business segments, its wealth management earnings surged by 27% YoY in the latest fiscal year with the help of higher client assets and market appreciation. Similarly, Royal Bank’s personal banking registered a 9% YoY earnings growth for the year, fueled by higher interest income.
Despite facing higher provisions for credit losses due to macroeconomic pressures, Royal Bank continues to maintain a robust common equity tier-one ratio of 13.2%, well above regulatory requirements. In the latest fiscal year, the bank also returned $8.1 billion to shareholders through dividends and share buybacks. For long-term investors, RY’s consistent returns and solid balance sheet make it a safe bank stock to buy now.
Canadian Imperial Bank stock
Canadian Imperial Bank of Commerce (TSX:CM) delivered an impressive 42.5% stock price gain in 2024, emerging as the strongest performer among Canada’s top five banks. Currently trading at $90.97 per share with a market cap of $85.7 billion, it offers a compelling 4.3% annualized dividend yield with quarterly payouts.
Just like Royal Bank, Canadian Imperial Bank also reported record results for its fiscal 2024 (ended in October), with a net annual profit climbing 13% YoY to $7.2 billion. Its fourth-quarter earnings alone showcased a solid 27% YoY jump in net profit to $1.88 billion with the help of higher deposit margins, volume growth, and efforts to improve efficiency.
As further reduction in interest rates in Canada and the United States may stimulate borrowing and economic activity in the coming quarters, Canadian Imperial Bank could benefit from these trends, which may help its stock continue soaring in 2025.
