Buy CIBC and Royal Bank, Avoid BMO, TD, and Scotiabank

Investors seeking diversification away from Citygroup (C), Bank of America (BAC), and JP Morgan (JPM) may consider five Canadian banks. Among CIBC (CM), Royal Bank (RY), Bank of Montreal (BMO), TD Bank (TD), and Scotiabank (BNS), the first two are the most attractive investments.

CIBC posted revenue rising by 8.1% Y/Y to $6.16 billion. Its provision for credit losses increased slightly, up by $76 million to $514 million.

Royal Bank raised its dividend by 2.9% after reporting Q2 results. It will also buy back 30 million shares. As the safest non-country-owned bank in the world, RY stock is an attractive buy.

Bank of Montreal is a company to consider avoiding. It reported PCL rising to $705 million. Revenue increased by 2.3% Y/Y to $7.97 billion.

TD Bank, which set a provision of $450 million associated with a U.S. anti-money laundering probe, posted good Q2 results. It earned $2.04 a share (non-GAAP) after revenue increased by 11.5% Y/Y. However, the AML issues will cloud the bank’s profit potential in the year ahead.

Scotiabank posted revenue growing by 5.6% Y/Y to $8.35 billion. However, its PCL increased by $300M Y/Y. The weakness in real estate markets may hurt BNS stock in 2024. Investors should avoid this stock until its outlook improves.

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