Many income-oriented investors regard Canada’s banking sector, specifically the Big Five banks, as a bedrock of stability. While these giant lenders are not immune from market headwinds, the banking stocks remain reliable passive-income providers.
If I’m investing in the top Canadian banks today, my first choice is Canadian Imperial Bank of Commerce (TSX:CM). At $81.60 per share, the year-to-date loss -9.19%. Considering its 168-year dividend track record, the 4.75% dividend should compensate for the temporary weakness.
My second option is outside the Big Five circle. EQB (TSX:EQB) is not a giant lender but has outperformed its larger peers in the last three years (+59.88%). It trades at $92.01 per share and pays a modest but safe 2.22% dividend (17.91% payout ratio). I’d invest $7,000 in either stock if the prices fall below the current levels.
Forever holding
CIBC, Canada’s fifth-largest bank, is a forever stock holding for its quarterly dividend payment consistency and generous yield. Market analysts’ low-price target is $77, a good entry point. Their 12-month average price forecast is $97.08, a +19% upside.
Fitch Ratings has a stable outlook for this $76.7 billion bank because of its strong business profile and a high concentration of residential mortgages. The rating agency noted CIBC’s moderate loan growth post-pandemic and strong asset quality. Its exposure to U.S. office loans is also manageable.
In the first quarter (Q1) of fiscal 2025 (three months ending January 31, 2025), revenue and net income rose 17% and 26% to $7.3 billion and $2.2 billion versus Q1 fiscal 2024. CIBC president and chief executive officer (CEO) Victor G. Dodig said, “Our diversified business platform, robust capital position and strong credit quality give us the foundation to deliver for stakeholders in the year ahead.”
Positive outlook
Equitable Bank, or EQB, is a $3.54 billion digital bank offering convenient online banking services. This mid-sized lender is also known as Canada’s Challenger Bank. In Q1 fiscal 2025, revenue and net income increased 8% and 3.2% year over year to $322.6 million and $107.7 million.
Its president and CEO, Andrew Moor, said, “We enter fiscal 2025 confident in EQB’s growth opportunities and ready to build on our exceptional performance this quarter. We enjoy leadership positions in insured multi-unit residential, single-family residential and decumulation markets where needs for capital are substantial.”
Due to the stronger activity in the housing market, single-family uninsured originations grew +23% in the first quarter. According to Moor, the tailwind of recent interest rate cuts provides a constructive backdrop for EQB’s enhanced loan growth and improving credit metrics.
In March 2025, Fitch Ratings revised its rating outlook from stable to positive. The successful diversification in the business and funding profiles prompted the outlook revision. Moreover, the rating agency believes that EQB would likely be more resilient to economic stress.
“While we will need to manage second-order effects of cross-border tariff threats carefully, our purely domestic market presence, focus on lending in large Canadian urban centres with diversified economies, and the highly competitive nature of our Challenger Bank services support a positive outlook,” Moor added.
Solid choices
A big bank like CIBC is a solid anchor in an investment portfolio, while EQB provides passive-income stability.
