Tariff wars are escalating, and investors are scrambling for stability. Canadian chartered banks, with their century-proven resilience, offer a compelling solution. Among them, Royal Bank of Canada (TSX:RY), or RBC, and Bank of Montreal (TSX:BMO) stock stand out as stalwarts capable of weathering economic storms. Both have navigated recessions, world wars, and pandemics while rewarding shareholders with unwavering dividends. Let’s dive into why these two bank stocks could anchor your portfolio through uncertainty in 2025 and beyond.
Royal Bank of Canada (RBC) stock
RBC’s dominance isn’t just about its sheer market size – it’s also about preparation. With a Common Equity Tier 1 (CET1) ratio of 13.2%, far exceeding regulatory requirements, the $235 billion bank is armoured against loan defaults and economic contractions. This capital buffer absorbs shocks.
In a February earnings call, Royal Bank revealed it “ran several scenarios with respect to the depth, breadth and duration of potential tariffs…” and the bank’s capital strength, diversified funding, strong brand and diversified business model shielded it from the storm. The bank is confident that “even under a more severe scenario of lower revenue and higher credit losses”, its capitalization would remain adequate.
RBC confirmed its medium-term objectives for above 7% earnings growth, and 16% return of equity (ROE) in a recent investor day presentation. The bank is repurchasing its stock this quarter, despite market jitters, to support positive shareholder returns.
RBC’s commitment to shareholder returns shows in its 155 years of uninterrupted dividends since 1870 – through the Great Depression, the 2008 Global Financial Crisis, and the COVID-19 pandemic. It’s 3.6% yield and a conservative earnings payout rate below 50% make the RBC stock dividend a must-hold for stable passive income during market downturns.
Further, following its acquisition of HSBC Canada last year, Royal Bank is making progress towards realizing $740 million in synergistic cost savings by 2026. It’s already more than half-way towards the target, and the acquisition boosted earnings growth to 43% during the first quarter of 2025. Organic growth still showed strong momentum given a 29% adjusted earnings growth excluding HSBC.
RBC isn’t just surviving – it’s evolving, leveraging technology, and scaling to future-proof its operations.
Bank of Montreal: Bridging borders, building value through downturns
Bank of Montreal marries tradition with ambition, and its recent performance makes it worth investors’ consideration, even during turbulent times. During the first quarter of 2025, BMO’s net income surged 65% year-over-year, driven by lower credit losses and disciplined cost management. A CET1 ratio of 13.6% offers flexibility to reinvest in growth while rewarding shareholders.
During BMO’s earnings call, CEO Darryl White acknowledged that tariff uncertainties have caused some clients to “pause” investments. However, he stressed the bank’s “diversified balance sheet” and “North American platform” as stabilizing forces. CFO Tayfun Tuzun added that BMO’s U.S. operations – targeting a 12% return on equity by 2026 — are central to its long-term resilience. Initiatives like expanding commercial banking in California and integrating Bank of the West’s client base underscore this growth trajectory.
BMO generates about a third of its revenue from U.S. banking activity. This exposure to a larger, faster-growing economy (International Monetary Fund forecasts U.S. GDP growth at 2.7% in 2025 vs. Canada’s 2%) provides a natural hedge against domestic headwinds.
Moreover, BMO stock’s 4.6% dividend yield, among the highest of Canadian banks, is supported by a sustainable payout ratio under 60% despite a double-digit three-year dividend growth rate. The bank has paid uninterrupted dividends since 1829!
Management had repurchased 3.2 million shares this year by February earnings, signaling its confidence in BMO’s potentially undervalued stock, which trades at a forward price-earnings (P/E) ratio under 12 and a forward price-earnings-to-growth (PEG) ratio of 0.7.
Investor takeaway
Trade wars may test the Canadian economy, but these bank stocks are built to endure. RBC’s global reach and technological innovation, and BMO’s U.S. foothold create natural buffers. For investors, this translates to stocks that compound wealth quietly, even in choppy markets. Their dividends act as a steady income stream, while their financial fortitude limits downside risk.
In uncertain times, simplicity often triumphs. RBC stock and BMO stock aren’t flashy disruptors, but their proven business models – tested across centuries – offer something more valuable: reliability. Whether tariffs escalate or recede, these Canadian banks have the capital, leadership, and geographic diversity to protect portfolios while delivering consistent returns.
