Canadian and global investors have been confronted with a banking crisis that has already claimed some significant names worldwide. Silicon Valley Bank, which served as the 16th-largest bank in the United States, buckled and then broke in the month of March. Signature Bank, another middle-of-the-pack U.S. bank, suffered a collapse in the days that followed. These smaller banks relied on investments in Treasury Bills and mortgage-backed securities in a low interest rate environment. Many investors have heard this story before during the 2007-2008 financial crisis.
Today, I want to discuss why I’m looking to snag two Canadian bank stocks that fall outside of the Big Six. Let’s jump in.
Can you trust Canadian bank stocks outside of the Big Six?
There are times when Canadian consumers bemoan the hardline fiscal conservativism of our financial institutions. Indeed, Canadian regulators continued to require stringent capital and liquidity buffers from our domestic banks. Those requirements remain the same for Canada’s smaller financial institutions.
The last big scare came in 2017 during a significant housing pullback that nearly resulted in the bankruptcy of Home Capital Group. This led regulators to beef up underwriting requirements and levy a foreign buyers’ tax in Ontario. The first regional bank I’m covering today also found itself embroiled in this mini crisis for Canada housing, as it was forced to correct a mortgage underwriting issue. That institution is Laurentian Bank (TSX:LB).
This Quebec-based bank stock is very enticing in late March
Laurentian Bank is a Montreal-based bank that is concentrated mainly in its home province of Quebec. Its shares have dropped 6.9% month over month as of close on March 21. The stock has now plunged 27% in the year-over-year period. Investors can see more details with the interactive price chart below.
This bank released its first-quarter (Q1) fiscal 2023 earnings on February 28, 2023. In Q1 2023, the bank delivered adjusted net income of $54.3 million, or $1.15 per diluted share — down 6% and 12%, respectively, compared to the first quarter of fiscal 2022. On the business front, Laurentian launch a “reimagined VISA experience.” This will allow the regional bank to expand its reach to customers across Canada.
Laurentian finished Q1 2023 with an excellent balance sheet, which means it is well suited to weather economic and financial turbulence. Its shares possess a very favourable price-to-earnings (P/E) ratio of 6.5. Meanwhile, it offers a quarterly dividend of $0.46 per share. That represents a very strong 5.7% yield.
Here’s a Canadian bank stock that offers exposure to the opposite side of the country
Canadian Western Bank (TSX:CWB) is an Edmonton-based regional bank that has made a recent push into Ontario. This bank stock has plunged 13% over the past month. Its shares are now down 1.8% so far in 2023.
The bank unveiled its first batch of fiscal 2023 earnings on March 2. Chris Fowler, its president and chief executive officer, predicted that Canadian Western was on track to deliver “strong full-service growth” for fiscal 2023. In Q1 2023, the bank saw adjusted earnings per share (EPS) climb 16% from Q4 fiscal 2022 to $1.02. Canadian Western boasts a fantastic balance sheet. Moreover, it has delivered 31 straight years of dividend growth. That makes this bank stock one of the most dependable Dividend Aristocrats on the TSX.
Shares of this bank stock currently possess an attractive P/E ratio of seven. It offers a quarterly distribution of $0.32, which represents a strong 5.3% yield.
