With rising market uncertainty amid geopolitical tensions and fears of a global trade war, TSX investors are searching for safe-haven stocks that could weather temporary downturns while still providing stable returns. Interestingly, Canadian bank stocks have been among the most reliable defensive investments for conservative investors due mainly to their strong balance sheets, steady dividends, and dominant market positions.
While no stock is completely immune to economic slowdowns and recessions, some large Canadian banks have a long track record of resilience in past downturns by maintaining stable financials and consistent dividend payouts. In this article, I’ll highlight two top Canadian bank stocks that could help shield your portfolio against market volatility, offering both stability and long-term income growth.
Bank of Montreal stock
The first Canadian bank stock you may want to consider to protect your portfolio from market downturns is Bank of Montreal (TSX:BMO). With a market cap of $101.1 billion, it’s currently the third-largest bank in Canada, as its stock trades at $139.47 per share. If you’re looking for a stable income source, BMO also offers a strong annualized dividend yield of 4.5%, with consistent quarterly payouts.
Lately, BMO’s stock performance has been a mix of ups and downs, but its long-term trajectory remains strong. Over the past year, the stock has gained 10.87%, and in just the last six months, it’s up over 24%, reflecting strong investor confidence.
Despite facing short-term challenges due to the higher interest rate environment, BMO continues to generate massive revenues, posting $8.37 billion in its latest reported quarter ended October 2024. However, the bank did face pressure from increased provisions for credit losses, which surged to $1.52 billion compared to $446 million in the same quarter of the previous fiscal year. Even with this headwind, BMO’s common equity tier-one ratio improved to 13.6% during the quarter, showcasing the strength of its balance sheet.
One of the reasons BMO remains a solid pick for downturn protection is its long-term growth strategy. Notably, the bank has been prioritizing digital banking solutions, which are expected to improve its operational efficiency and profitability in the years to come.
Canadian Imperial Bank stock
If you’re looking for another solid bank stock to help weather market downturns, Canadian Imperial Bank of Commerce (TSX:CM) is a great contender. With a market cap of $82.6 billion, it is currently the fifth-largest bank in Canada, as its stock trades at $88.31 per share after rallying by 45% over the last 12 months. Despite this strong rally, CM stock still offers a solid 4.4% annualized dividend yield.
In the most recent quarter ended in October, Canadian Imperial Bank’s total revenue rose 13% YoY to $6.62 billion. Meanwhile, the bank’s net income jumped 27% from a year ago to $1.88 billion as its core banking operations continued to show strength.
Moreover, CIBC is also actively expanding its presence in high-net-worth banking, wealth management business, and artificial intelligence-driven solutions. Given these efforts, I expect its financial growth to accelerate in the long run.
