All six of Canada’s major banks topped analyst expectations for the third quarter. Profit grew, capital remained solid, and the economy avoided the downturn many investors had feared. But picking a winner is not straightforward. The sector now trades near 15 times forward earnings, the highest level since 2010 and well above the 10.8 times ten-year average. When prices already reflect future growth, a strong quarter offers less of a boost.
The earnings beats were broad-based, with capital markets as a shared bright spot for Royal Bank of Canada (TD), Bank of Nova Scotia, and National Bank of Canada. This came against a backdrop of persistent trade uncertainty and geopolitical tension.
When comparing bank stocks, investors should look at adjusted EPS growth, return on equity, credit losses, capital strength, valuation, and whether the quarter relied too heavily on trading revenue.
| Bank | Q3 Adjusted EPS Growth | Q3 Adjusted ROE |
| BMO | 22% | 14% |
| Scotiabank | 21% | 14.2% |
| CIBC | 26% | 16.8% |
| National Bank | 26% | 16.8% |
| RBC | 11% | 18.1% |
| TD | 26% | 16% |
Royal Bank posted the highest return, but its premium valuation leaves little room for error. CIBC delivered broad growth, though its price-to-book ratio has expanded sharply. Scotiabank finally cleared its 14% return target, and the stock celebrated with a 7% earnings-day jump. BMO still faces U.S. integration work, while National Bank must digest Canadian Western Bank and push forward with the Laurentian Bank portfolio deal.
Toronto-Dominion Bank stands out among the group. Adjusted EPS came in at $2.77, up 26% and roughly $0.30 above consensus—the strongest earnings beat of the season. Canadian banking set a profit record, wholesale banking profit jumped 87%, and reported U.S. banking profit rose 41%. Excluding special items, U.S. profit increased a more sustainable 12% as loan and deposit margins improved.
TD’s Common Equity Tier 1 ratio of 14.3% is the highest among the Big Six. That capital supports lending, buybacks, and dividends while funding the U.S. remediation work. The bank maintained its quarterly dividend of $1.12 per share, or $4.48 annually. At about $165.87 per share, the yield is roughly 2.7%. The payout remains well covered, though the share-price rally has turned what was once a high-yield play into a growth-and-income stock.
Risks remain. TD expects fiscal 2026 U.S. anti-money-laundering remediation and control spending of about US$550 million, up from US$500 million. Important work continues through 2027, and regulators—not management—will decide when the U.S. asset cap is lifted. On valuation, the stock trades near 17 times adjusted earnings, compared with about 13 times a year ago. A more cautious approach would be to start with a smaller position and add only as U.S. remediation milestones and earnings confirm the thesis.
None of the Big Six looks cheap enough to buy without deeper analysis. TD remains the top pick because it combines the quarter’s strongest earnings beat, the group’s best capital ratio, and improving U.S. profitability. Investors can begin gradually. If TD completes its compliance repair and keeps expanding earnings, today’s premium may look reasonable in hindsight—though the stock may never feel cheap again.
