The country’s big banks are all quite strong. These bank stocks benefit from strict regulation, diversified revenue streams, and strong capital ratios. Yet the real standouts are those growing earnings even in slower economic periods. When a bank checks the boxes of steady profits, diversified growth, a safe balance sheet, and a juicy, sustainable yield, that’s when it becomes the kind of stock you can buy and hold. From there, let it confidently compound for decades. Yet above them all, I like this one the best.
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LB
Laurentian Bank (TSX:LB) could be one of the best Canadian bank stocks to buy in 2025. It’s finally entering a true turnaround phase, something the market hasn’t priced in yet. For years, Laurentian lagged behind its peers due to weak earnings growth, outdated systems, and strategic missteps. But 2025 looks different. New leadership, a reset strategy, and a stronger capital base have set the stage for meaningful recovery. Yet it still trades at a steep discount.
Laurentian now trades at a valuation far below the Big Five and even below other regional lenders. At writing, it trades at 10.8 times earnings, and incredibly just 0.56 times book value! This gives investors a margin of safety few bank stocks offer. Despite the discount, the bank maintains healthy capital ratios, with its CET1 ratio sitting comfortably above regulatory requirements, giving it protection against credit losses and room to reinvest.
That capital strength is key in a rising-rate environment where many banks are tightening risk. Laurentian has deliberately shifted toward more stable, higher-margin loan categories. It now focuses on commercial banking and specialty finance rather than competing head-to-head in the low-margin consumer mortgage space. Those segments generate stronger yields and more diversified revenue, exactly what a modern Canadian bank needs to thrive.
More to come
The bank’s dividend is another major attraction. Laurentian offers one of the highest yields of any Canadian bank, currently at about 5.7% at writing, and its payout is backed by conservative underwriting and steady fee income with a 61% payout ratio. While dividend cuts in the past hurt investor sentiment, the new management team has rebuilt the bank’s financial footing and is now operating with a much more disciplined payout strategy.
What really sets 2025 apart is the bank’s operational reset. Laurentian has been simplifying its branch network, modernizing its digital banking systems, and cutting structural costs. These moves will lift long-term efficiency. Its focus on commercial lending and niche financing areas like inventory lending and equipment finance is already translating into better profitability. With Canadian businesses leaning heavily on alternative lenders and specialized credit providers, Laurentian stands to gain market share where the Big Five aren’t as dominant.
Banks undergoing successful turnarounds tend to outperform in the early stages of recovery, and Laurentian is positioned right at that inflection point. It’s a smaller, more agile bank with a renewed strategy and a lot of room to grow into a fair valuation.
Bottom line
Put simply, LB offers something the major Canadian bank stocks don’t: deep value, high income, and meaningful upside potential. It’s a bank with a clean balance sheet, rising efficiency, high yield, and a credible path to stronger earnings – All wrapped in a valuation that leaves room for substantial re-pricing. Meanwhile, here’s what investors could bring in from a $7,000 investment even today.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL ANNUAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| LB | $32.87 | 212 | $1.88 | $398.56 | Quarterly | $6,968.44 |
For investors seeking a contrarian banking pick with real turnaround potential, Laurentian could be the most compelling Canadian bank stock to buy this year.
