Even though the TSX Composite Index has been on a strong run, market uncertainties remain, with concerns over economic growth, interest rate policies, and trade tensions keeping investors on edge. However, periods of uncertainty often create great buying opportunities — especially in fundamentally strong sectors like banking.
Canadian banks have a long history of resilience, stable dividends, long-term growth, and consistently rewarding patient investors with strong returns. Right now, some top Canadian bank stocks are trading at a discount, making them excellent long-term investment opportunities. In this article, I’ll highlight two top undervalued bank stocks that could be amazing buys on the dip today.
TD Bank stock
The first bank stock that I find undervalued is Toronto-Dominion Bank (TSX:TD). While nearly all other large Canadian banks rallied last year, TD stock ended the year with a nearly 11% decline.
A large part of this weakness could be attributed to TD’s involvement in a U.S. anti-money laundering (AML) probe, which resulted in a hefty financial penalty of about US$3.1 billion. This weighed heavily on investor sentiment, causing the stock to underperform its peers despite the bank’s otherwise strong fundamentals. Regulatory scrutiny and concerns about compliance failures often spook investors, and this case was no exception.
Currently, TD Bank stock trades at $82.25 per share, giving it a market cap of $143.8 billion. One bright spot for income-focused investors is its attractive dividend yield of 5.1%, making it a solid option for those seeking passive income.
That said, despite the regulatory challenges, TD’s financial foundation remains strong. The bank’s Canadian personal and commercial banking segment continues to post record revenues, reflecting solid loan and deposit growth. In its latest quarter ended October 2024, TD reported $15.5 billion in revenue, and while its adjusted net income dipped due to the AML settlement, the bank’s core operations remained robust.
Besides its strong financials, declining interest rates could boost loan demand in 2025, which could help TD improve its profitability and drive its stock higher.
Scotiabank stock
Now, let’s talk about Bank of Nova Scotia (TSX:BNS), or Scotiabank, the second bank stock that looks like a solid buy on the dip today. Although BNS stock ended 2024 with a solid 20% gain, it has slipped by around 6% so far in 2025 to currently trade at $72.64 per share with a market cap of $90.1 billion. At this market price, this stock also offers an impressive 5.9% annualized dividend yield.
In its fiscal year 2024 (ended in October), Scotiabank reported a net profit of $7.9 billion, up 5.9% year over year. Similarly, its adjusted net profit also showed improvement, hitting $8.6 billion. The bank’s Canadian and international banking segments continued to see growth, with strong loan demand and higher margins.
In addition to expected improvements in loan demand in the coming quarters, Scotiabank’s strong presence in international banking, solid balance sheet, and focus on long-term expansion make it an amazing bank stock to buy at a discount now and hold for the long term.
