Ok, now that I have your attention I just wanted to inform you all that there is more than just the 5 big banks in Canada. Some of you may also be saying “who are the big 5 Canadian banks?”. The big 5 Canadian banks who almost run a monopoly in Canada are Royal Bank of Canada(RY), Toronto Dominion(TD), Bank of Nova Scotia(BNS), Bank of Montreal(BMO) and Canadian Imperial Bank of Commerce(CM). But these are not the Canadian banks that I would like to talk about.
The last thing I would ever say is that the big 5 would NOT be a good investment. They are literally 5 of the best companies that you could possibly invest into in Canada. Most of that stems from Canadian banking being the most regulated in almost the whole entire world. This really isn’t such a bad thing though because look at what is going on right now with Covid-19. I feel that if we didn’t have these rules and regulations in place that we would be in a much much worse situation.
There are however 4 OTHER Canadian banks that I would like to talk about. They are National Bank of Canada(NA), Laurentian Bank(LB), Canadian Western Bank(CWB), and VersaBank(VB). These 4 banks are not talked about anywhere near as often as the big 5 are talking about. I get it though, CIBC has the smallest market cap of the big 5 at only $35.5 Billion and National Bank of Canada has the biggest of the other 4 at $17.4 Billion. But just because its not worth as much doesn’t mean its not a very good investment.
These 4 banks have A LOT of the very same positive qualities that the bit 5 have. They all have positive Earnings Per Shares(EPS), they all have a very nice Price to Earning(P/E) ratios and they all pay a decent dividend(except Versabank, but thats ok). Look at their revenues over the last 5 years(at least) for each of these companies. Let me just post some of their figures that go hand in hand with what i’m saying.
- National Bank of Canada(NA)- Share Price $51.38, Market Cap $17.4 Billion, EPS 6.51, P/E 7.96, Dividend Yield 5.48%, Dividend Payout Ratio 42%.
- Laurentian Bank(LB)-Share Price $28.22, Market Cap $1.22 Billion, EPS 3.75, P/E 7.99, Dividend Yield 9.39%, Dividend Payout Ratio 79%
- Canadian Western Bank(CWB)-Share Price-$19.31, Market Cap-$1.72 Billion, EPS-3.11, P/E-6.34, Dividend Yield 5.87%, Dividend Payout Ratio 36%.
- VersaBank(VB)-Share Price $5.39, Market Cap $115.76 Million, EPS 0.86, P/E 6.36, Dividend Yield 1.83%, Dividend Payout Ratio 9%.
Now I know what you are saying, these numbers are not as impressive as the big 5 numbers but I feel that they are all still very good investment opportunities. VersaBank may have small numbers but they have no brick and mortar branches, they are all online but operate just the same as the other banks. I first started watching them because of their involvement with crypto currencies. Their Share price I feel is very on point and their dividend is nothing to retire on but I do like that their dividend payout ratio is also very low at 9%.
National Bank of Canada is probably the only one that can stand up to the big 5. Its revenue is massive compared to the other 3 and its earnings just keep getting better every quarter/year. They currently have over $246 Billion in assets and had a revenue of over $7.4 Billion in 2019. Their dividend payout ratio is nice and low and right in line and comparable to the big 5. They have been around since 1859 so they really know how to hang with the big guys.
Laurentian Bank is one that has struggled as of lately. They have been struggling to increase their revenue and have been falling in their earnings. I also feel at this time that their dividend payout ratio is way to high right now. They have about $44 Billion in assets which is still pretty impressive if you ask me. Although they do not have numbers to turn heads right now I hope that they can get the right people in place to turn that company around and take them back to the right up hill path.
Lastly Canadian Western Bank, they are the youngest of all these banks being founded in 1988. They have over $31.6 Billion in assets and their revenue has been increasing every year with over $861 Million in 2019. Their earnings are on the rise quarter after quarter and I feel that they are the underdog of these 4 banks. Looking at their numbers I feel that they are very undervalued and should be worth A LOT more than $19.67.
I know that everyone right now is down and in uncertain times with Covid-19 and everyone says that Canadian banks are a safe investment but if I have learned anything in these last 3 months its that nothing is safe. At the same time though, this is as safe as you can get when investing in on the TSX. Financials are one of the biggest sectors in Canada and should be looked through with a fine tooth comb to find the best bang for your buck.
That is all for today and remember everyone, invest in yourself first.