The Way To Play Canadian Banks Today

The Canadian financials sector is one of the largest and most important sectors in the overall economy. In this sector, Canada’s largest six banks make up a majority of the overall sector, reflecting in large part the outlook investors have on the Canadian economy and the lending landscape in the great white North.

With five relatively similar options, many investors question which the best contenders are, and how many banks to own in such a portfolio. In this article, I’m going to address these concerns.

On the topic of which banks to own, I’ve always leaned toward Royal Bank of Canada (TSX:RY)(NYSE:RY) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) as the best options to consider.

The country’s largest banks, these two lenders have the highest quality assets and the most diversified loan books of their peers, with a significant amount of international exposure broadening their cash flows and boosting their potential for long-term growth. These lenders are also among the most undervalued on the basis of growth, an important factor long-term investors should consider.

In terms of how many banks to own, I’d recommend investors pick one or two lenders such as Royal or TD to own, rather than all six banks. Investors could also choose an ETF covering the sector due to the growth and quality differential of these two players relative to their peers and the overall financials sector.
Invest wisely, my friends.