It’s an interesting time to be a new investor who’s in the market for shares of Big Six Canadian banks. Indeed, there’s always a best bank for your buck. This August, the title has to go to shares of Bank of Montreal (TSX: BMO), at least after its latest breakout moment. With a modest multiple and much more tailwinds for investors to get behind, I wouldn’t count the nearly $120 billion big bank out, especially as its shares start to show signs of going parabolic.
Indeed, BMO and its peers in the banking scene may not be the same yield heavyweights they were back in 2023 or even 2024, but they’re back in the earnings growth driver’s seat. And going into 2026, I think there’s more to look forward to as industry dynamics look to improve further.
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Big bank earnings season has been applaud-worthy, at least so far
Bank earnings season has arrived, and it’s been one for the record books, at least for the most part. With some big-name banks really blowing the numbers away, I think that Canadian investors who’ve gotten out amid their prior slides may wish to get back in on strength.
Indeed, as provisions for credit losses (PCLs) go on the descent (for BMO, they were down by double-digit percentage points this quarter) while other, more promising metrics start marching higher again, I think that it’s a mistake to count the big bank stocks now that they’ve found their footing. Indeed, the TSX Index is red-hot, and part of the reason is the strength in the so-called Big Six banking juggernauts. As we head into year’s end, I like the valuation in the big banks and their still relatively impressive dividend yields.
Of course, the yields aren’t as large as they were this time last year. However, for those looking for total returns (remember, that accounts for both capital gains and dividends paid), I see the bank stocks as a worthy bet, especially on any near-term pullbacks. At the time of this writing, shares of BMO still look incredibly cheap at 15.3 times trailing price to earnings (P/E), even after the latest post-earnings melt-up in shares. Undoubtedly, the 4.13% dividend yield is still well above that offered by the TSX Index.
However, it is somewhat discouraging that the yield is the lowest it has been in more than a year. While we can’t turn back time, I think that investors can look forward to a continued breakout as we head into the final four months of 2025.
Indeed, I think the post-earnings rally was warranted and think this could be the start of a potential run towards $180 per share. Indeed, that quarter was stellar, and analysts are likely lining up to reevaluate their price targets on the name.
Bottom line
That was a stellar quarter for BMO, and while shares are at fresh new highs, I still view them as a great bank for your buck. It’s a stellar performer, and its efforts are finally starting to pay off.
