3 Canadian Bank Stocks to Shield Against Market Downturns

Canadian bank stocks are some of the best options on the market, and these three are probably the top ones.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published April 3, 2025 4:40 pm EDT

When the stock market gets a bit wobbly, many investors look for investments that tend to hold up well. Canadian bank stocks have often been seen as reliable options. Offering some stability when the economic waters get choppy. Let’s take a closer look at three of the big Canadian banks listed on the TSX. We’ll examine how the banks have been doing recently to see how they might act as a bit of a safety net in uncertain times.

open vault at bank — Source: Getty Images

RBC

First up is Royal Bank of Canada (TSX:RY). As the biggest bank in Canada when you look at its market value, RBC has a long history of showing financial strength. In the first three months of 2025, RBC reported a net income of $5.1 billion. That’s a pretty impressive jump of 46% compared to the same period last year. This significant growth was helped by a 24% increase in its revenue. This reached $15.7 billion. The bank’s profit margin also improved, going up to 33% from 28% the year before.

One of the reasons RBC is so resilient is its diverse business model. In particular, the wealth management division saw a big boost, with income increasing by 48% in the first quarter. This jump shows that RBC has been strategically focusing on growing its wealth management services, which cater to a wide range of clients.

On top of that, RBC’s capital markets income also rose by 24%, indicating the bank has been doing well in areas like trading and investment banking. Investors who are looking for stability might find RBC’s consistent profitability and varied operations quite appealing. The bank stock’s strong financial footing allows it to weather economic downturns — all while still providing value to its shareholders.

TD

Next, we have Toronto-Dominion Bank (TSX:TD). TD Bank is another major player in the Canadian banking scene. In the first quarter of 2025, TD reported adjusted earnings of $2.02 per share, beating analyst estimates. Similar to RBC, TD’s wealth management business also saw good growth, with a 23% increase in income during the same period. This again reflects the bank’s focus on expanding its services in this area.

Furthermore, TD’s capital markets income surged by 46%, showcasing the bank stock’s strength in trading and investment banking activities. However, it’s worth noting that TD has faced some headwinds recently. The U.S. retail profits saw a decline of 34% due to regulatory issues and penalties related to money laundering. Despite these setbacks, TD remains a significant player in the financial sector and is working on addressing these regulatory concerns and improving its operational performance.

Scotiabank

Lastly, there’s Bank of Nova Scotia (TSX:BNS), commonly known as Scotiabank. Scotiabank is the third-largest bank in Canada based on its market value. In the first quarter of 2025, Scotiabank reported adjusted earnings of $1.76 per share, which was also better than analysts’ expectations.

Scotiabank’s global markets and banking division made a significant contribution to its earnings, with net income growing by 33% to $517 million in the first quarter. This growth reflects the bank’s strategic focus on expanding its operations internationally and taking advantage of opportunities in global markets. The bank has a strong presence in international markets, particularly in Latin America. This international exposure provides diversification benefits that can help offset any domestic economic challenges. By having a footprint in various countries, Scotiabank can tap into growth opportunities outside of Canada. This can offer investors a broader scope for potential returns.

Bottom line

Canadian bank stocks like RBC, TD Bank, and Scotiabank have generally been seen as providing stability during times when the market takes a downturn. The strong financial results, diverse operations, and strategic plans all contribute to resilience. However, it’s really important for investors to do their own thorough research and consider the unique circumstances of each bank, such as any regulatory challenges they might be facing or exposure to international markets, before making any investment decisions. Talking to a financial advisor can also provide you with personalized insights that are tailored to your individual investment goals and how much risk you’re comfortable taking.