Last week, Canada’s biggest banks posted quarterly results. Income investors should look at the strength of Royal Bank (RY) and CIBC’s (CM) results. They also raised their dividend.
Royal Bank hiked its dividend by 4.2% to C$1.48. In its fiscal fourth-quarter report, the firm reported an 18.8% Y/Y increase in revenue, to $15.07 billion. Its CET1 ratio of 13.2% would support strong volume growth.
Royal Bank’s return on equity of 16% is its primary growth driver. When the Bank of Canada cuts interest rates further to boost the real estate market, this bank’s loan portfolio will grow. So long as Royal Bank avoids higher delinquencies in the residential mortgage market, margins will rise.
CIBC hiked its dividend by 7.8% to $0.97. In Q4, it earned $J1.91 on revenue of $6.62 billion (+13% Y/Y). The bank focused on its clients, which paid off. It is building long-term, long-lasting relationships. This reduces churn and increases margins.
Unlike TD Bank (TD), Scotia Bank (BNS), and Bank of Montreal (BMO), CIBC is proactively managing troubled loans. The firm did not chase market share, which would have introduced higher loan loss provisions. Looking ahead, CIBC expects its mortgage business to accelerate profitably in 2025.
Your Takeaway
RY and CM stocks are attractive income stocks while BMO, TD, and BNS are not stocks to own now.