Canadian bank stocks have seen strong buying interest in recent months, supported by improving quarterly results and encouraging economic indicators, including solid November job data and an upward revision to third-quarter GDP. Additionally, falling interest rates are easing pressure on borrowers, which could lower delinquencies and further strengthen banks’ balance sheets. While these gains have pushed valuations higher across much of the sector, the following two banks continue to trade at relatively attractive levels, making them compelling opportunities for investors.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) offers a wide range of financial services across several countries. Earlier this month, the bank delivered strong fourth-quarter results, surpassing analysts’ expectations. Revenue rose 15% year over year to $9.8 billion.
A 17% increase in non-interest income and a 13.5% rise in net interest income have supported its revenue growth. Non-interest income benefited from higher contributions from associated firms such as KeyCorp, along with stronger wealth management revenue, underwriting and advisory fees, and banking fees. Meanwhile, net interest income was supported by an improved net interest margin, loan portfolio growth, and favourable currency translation.
BNS also strengthened its balance sheet throughout the year, improving its loan-to-deposit ratio and boosting capital and liquidity metrics. Net income came in at $2.21 billion, including $352 million in adjusted items such as restructuring charges and severance provisions. Adjusted net income was $2.56 billion, or $1.93 per share, well above analysts’ expectations of $1.84. Adjusted earnings per share (EPS) grew 22.9% year over year, while return on equity (ROE) improved from 10.6% to 12.5%.
Strategically, the bank focuses on expanding in lower-risk North American markets while scaling back less profitable or higher-risk operations in Latin America. This reallocation of resources toward higher-return opportunities aims to streamline operations and enhance profitability. Combined with its improving loan-to-deposit ratio and strengthened capital position, these initiatives should support solid financial performance in the coming quarters.
Following its strong fourth-quarter results, the stock is up over 28% year to date. Despite this rally, BNS still trades at attractive next-12-month (NTM) price-to-sales and price-to-earnings multiples of 3.1 and 12.3, respectively. The bank has also paid uninterrupted dividends since 1833 and currently offers a healthy yield of 4.43%. Given its valuation, operational momentum, and dividend history, BNS appears to be an excellent buy at current levels.
Bank of Montreal
Another Canadian bank trading at attractive levels is Bank of Montreal (TSX: BMO), which is valued at NTM price-to-sales and price-to-earnings multiples of 3.3 and 12.9, respectively. Earlier this month, the bank reported a strong fourth-quarter performance, with revenue rising 4.3% year over year. This growth was supported by a 9.3% increase in non-interest income and a 1.1% lift in net interest income.
Net income for the quarter was $2.3 billion. Excluding one-time items, adjusted net income was $2.51 billion, or $3.28 per share—beating analysts’ expectations by $0.25. Adjusted EPS grew an impressive 73% year over year, driven by revenue growth and a reduction in provisions for credit losses. The bank also delivered a solid improvement in adjusted ROE, rising from 7.4% to 11.8%.
Last month, BMO acquired Burgundy Asset Management, a firm that offers investment management services to private clients, foundations, and family offices. This acquisition strengthens BMO’s presence in the country’s investment counsel space, particularly among high-net-worth and ultra-high-net-worth clients. In addition, the bank continues to invest in digital capabilities and AI-driven solutions to enhance customer experience and operational efficiency. Taken together, these initiatives support a healthy growth outlook for BMO.
The bank has also demonstrated exceptional commitment to shareholders, having paid dividends for 196 consecutive years—the longest dividend payout record among Canadian companies. It currently offers a reasonable forward dividend yield of 3.81%.
