U.S. tariffs spook investors, who worry about the financial pain that could result if trade tensions persist. However, despite the heightened market volatility due to a potential full-blown trade war, Canada’s banking sector remains in good shape. According to Fitch Ratings, the lenders are positioning for the economic impacts of tariffs, as evidenced by the slow revenue momentum in the second quarter (Q2) fiscal 2025.
Bank of Nova Scotia analyst Mike Rizvanovic and his associate, Felix Fang, said, “We believe the group is as recession-ready as it has ever been.” They added that banks are now better prepared for credit losses and have more capacity to absorb a spike in losses.
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TFSA anchor stock
The big banks are logical options for Canadian investors looking for anchors in their Tax-Free Savings Account (TFSA). My choice for TFSA anchor stock is Bank of Montreal (TSX:BMO), the TSX’s dividend pioneer. No investor can outlive its 196-year dividend track record. You can buy and hold the stock for as long as you like.
Canada’s third-largest bank has a market capitalization of $106.95 billion. BMO has endured challenging economic times, consistently demonstrating profitability and earnings growth. The $148.02 share price buys you peace of mind. Given the 4.4% dividend yield, a $21,000 investment will generate $231 in quarterly passive income and remain intact.
Financial performance
In Q2 fiscal 2025, revenue and net income increased 8.8% and 5.1% to $8.68 billion and $1.96 billion compared to Q1 fiscal 2024. For the first half of the fiscal year, the top and bottom lines rose 14.7% and 29.8% year-over-year to $17.95 billion and $4.1 billion, respectively. The total provision for credit losses (PCL) during the six months increased 55% to $2 billion from the same period a year ago.
Darryl White, BMO Financial Group’s CEO, said the bank delivered strong revenue and pre-provision, pre-tax earnings growth across each operating group. “We’re executing against our plan to rebuild return on equity, including actions to optimize our balance sheet and invest for growth,” he added.
White further stated the robust capital position enables BMO to return capital to shareholders through buybacks and higher dividends. The big bank stock advanced nearly 13% in the last six months, outperforming its peers except for Toronto-Dominion Bank.
U.S. business revamp
BMO acquired San Francisco-based Bank of the West in February 2023 and completed the core and digital platform integration in October. On June 5, 2025, the Canadian lender announced a revamp of its management team as it restructured the U.S. businesses.
Aron Levine, a former senior executive at Bank of America, will lead the newly combined U.S. operation. BMO also announced executive moves in Canada. White said the leadership change aims to boost the bank’s profitability. All appointments are effective July 7, 2025.
TFSA plan
A TFSA investment portfolio should have an anchor stock. BMO is perfect in the registered investment account, where money growth is tax-free. The big bank stock is a reliable source of passive income, given its nearly two centuries of dividend payments. While economic headwinds are on the horizon, it should withstand them, as it has in previous decades.
