Trade Tensions Shouldn’t Scare You Away From These 3 Bank Stocks

The U.S.-Canada trade dispute has many worried but investors should still have confidence in top Canadian banks like Toronto-Dominion Bank (TSX:TD)(NYSE:TD).

| More on:

The decision by the Trump administration to impose steel and aluminum tariffs on Canada and other key allies rattled members of the G-7. Canada has been lobbying White House officials to exempt Canada even after the announcement, and there do appear to be some supporters of that policy shift in Trump’s inner circle. Chief economic advisor Larry Kudlow described the trade dispute as a “family quarrel” and seemed optimistic that the spat “can be worked out.”

Kudlow also gave insight into Trump’s thinking, which is unlikely to comfort those hoping for a return to the status quo. According to Kudlow Trump views multilateralism as an obsolete system, one that “has been broken in the last 20-years plus.”

Canada and its sympathizers in the Trump administration have attempted to emphasize the integrated nature of both economies, and the surplus the U.S. has enjoyed. Today I want to focus on three Canadian bank stocks with a sizeable footprint south of the border. Investors should not let this trade dispute, which is still in its early stages, drive them away from these profit machines.

Toronto-Dominion Bank (TSX:TD)(NYSE:TD)

TD Bank stock has climbed 2.4% in 2018 as of close on June 6, and shares are up 17.5% year over year. Representatives from TD Bank reportedly met with foreign affairs minister Chrystia Freeland back in early 2017 to discuss U.S.-Canada trade relations. TD Bank was likely chosen specifically because it boasts the largest U.S. footprint of any of the Big Six Canadian banks.

TD Bank offered an attractive entry point in mid-April, but that does not mean the stock isn’t a good buy today. In the second quarter, its U.S. Retail banking segment posted adjusted net income of $1.05 billion, representing a 16% increase from the prior year. Earnings were boosted by fantastic growth in deposit and loan volumes and the lower corporate income tax rate thanks to the U.S. Tax Cuts and Jobs Act.

Royal Bank of Canada (TSX:RY)(NYSE:RY)

Royal Bank stock has dropped 3.3% in 2018 so far, but is up 6.9% year over year. In the second quarter, Royal Bank reported net income of $3.06 billion, representing a 9% jump from Q2 2017 and diluted earnings per share increased 11% to $2.06. Its Wealth Management segment saw profit rise 25% from Q2 2017 due to higher interest rates, increased volume growth, and the benefits of U.S. tax reform.

Bank of Montreal (TSX:BMO)(NYSE:BMO)

Bank of Montreal has seen its stock rise 4.7% over the last three months as of close on June 6. The bank released its second-quarter results on May 30. Net income rose 13% year-over-year to $1.24 billion and BMO increased its dividend 7% to $0.96 per share, representing a 3.6% dividend yield.

The U.S. Personal and Commercial banking segment saw profits surge 46% year-over-year to $348 million. Echoing a similar trend among the three banks, BMO saw U.S. earnings powered by strong revenue growth and the benefit from U.S. tax reform.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.

More on Bank Stocks

Pile of Canadian dollar bills in various denominations
Stocks for Beginners

Is Royal Bank of Canada Stock a Buy for its 3.3% Dividend Yield?

Royal Bank stock has long been one of the best buys on the TSX, and that remains the case after…

Read more »

senior relaxes in hammock with e-book
Bank Stocks

Outlook for Bank of Nova Scotia Stock in 2025

Here’s what makes Bank of Nova Scotia (TSX:BNS) a really attractive stock for income-focused, long-term investors heading into 2025.

Read more »

Lights glow in a cityscape at night.
Bank Stocks

2 Canadian Bank Stocks to Buy at a Discount

These Canadian bank stocks might be attractive heading into next year.

Read more »

dividends can compound over time
Bank Stocks

1 Growth Stock Down 11% to Buy Right Now

EQB Inc (TSX:EQB) is a growth stock that took a beating recently. Here's why it might be a good dip…

Read more »

up arrow on wooden blocks
Bank Stocks

This Canadian Bank Stock Has Nearly Doubled in 14 Months

CIBC (TSX:CM) stock is really gaining in momentum lately. The stock looks like a great buy going into 2025!

Read more »

A worker uses a double monitor computer screen in an office.
Bank Stocks

Better Bank Stock: TD vs EQB Inc

Toronto-Dominion Bank (TSX:TD) is a giant in banking, but EQB Inc (TSX:EQB) is growing faster.

Read more »

data analyze research
Bank Stocks

TD Bank: Buy, Sell, or Hold in 2025?

TD stock is down about 12% in 2024. Is it now oversold?

Read more »

ETF stands for Exchange Traded Fund
Bank Stocks

A Canadian Bank ETF I’d Buy With $1,000 and Hold Forever

This unique Hamilton ETF gives you 1.25x leveraged exposure to Canada's Big Six bank stocks.

Read more »