The big Canadian bank stocks are in a seemingly unstoppable bull market right now, even with the TSX Index giving back some of the impressive summertime gains in recent sessions. Indeed, only time will tell just how resilient the top names in banking are once the TSX Index runs into its next 5–10% decline. Either way, I don’t think you can refer to the Big Six basket of bank stocks as frothy quite yet. At the end of the day, valuations are still relatively modest, especially when you consider the potential for earnings growth to pick up in the year ahead.
Indeed, some of the most notable big banks have been held back by rising provisions for credit losses (PCLs) in recent years. Nowadays, investors and analysts have a more constructive view after recent earnings have continued to impress Bay Street. Of course, buying the big bank stocks on strength rather than weakness entails a much lower dividend yield.
However, with more enticing growth prospects on the horizon as rates fall further, I wouldn’t bet against the banks while they’re in the midst of their powerful rallies. They appear to have staying power, and a market-wide sell-off might not be enough to derail them. Of course, more loan growth is a significant plus, but so too is investor appetite for dividends.
Indeed, a bank’s dividend, even if it’s 1–2% lower than its peak, looks a heck of a lot more attractive in an environment where GICs (Guaranteed Investment Certificates) yield less than 3% than where they were yielding more than 5%. In any case, GIC rates could fall further from here, making the case for sticking with a bank stock even stronger.
In this piece, we’ll look at one of the best bank stocks that could be worth scooping up today for those who think the big banks can extend their run into 2026.
TD Bank
Remember when many were throwing in the towel on shares of TD Bank (TSX:TD) as the headlines about the money-laundering aftermath dominated? Neither do many investors, who’ve been quick to get back into the premier and still dirt-cheap big bank on the way up. Despite recently breaking out to new highs close to $110 per share, the $188 billion banking juggernaut still looks as cheap as ever, especially after its latest quarterly earnings report.
The stock trades at a mere 9.4 times trailing price-to-earnings (P/E), which I don’t think makes a lot of sense. Arguably, the discount to its peers is overdone and could stand to narrow over the coming months, especially as TD continues to post solid numbers alongside its peers.
For those who missed the year’s banking surge (I don’t think investors have missed all too much), I think TD stock is a name to watch (or even buy) as its new CEO, Raymond Chun, continues to pull off what now appears to be a profoundly successful turnaround. The most exciting part is it’s not over yet!
Indeed, Mr. Chun arrived at a challenging time in the bank’s history. And it did not take long for him to pivot and nudge TD back to the growth track despite the circumstances. I think Chun is a standout CEO and one who could take TD even higher over the next several years, even with the U.S. regulatory roadblocks in place.
Bottom line
In short, I think the bank rally has legs. And TD stock could lead the charge, given its single-digit P/E multiple, which could allow it to benefit from multiple expansion in addition to earnings growth going into 2026.
