Royal Bank of Canada (TSX:RY) & Toronto Dominion (TSX:TD): 2 Bank Stocks on Investors’ Radar

Summary

• Royal Bank of Canada (TSX:RY) and Toronto Dominion (TSX:TD) emerged among the most traded shares on the Toronto Stock Exchange.
• Both the banks stocks have paid out consistent dividends and have high yields.
• With the economic activity is not expected to attain pre-pandemic levels any time soon, these two dividends paying bank stocks are high on investors’ radar.

Canada’s robust banking and financial system are often considered among the safest systems in the world. When the pandemic caused a sudden halt in the nation’s economic activities, the banks quickly adapted to the changing market circumstances and set aside billions in credit loss provisions. The act, though supported by the central bank, initially presented a bleak prospect. However, in the latest third-quarter 2020 earnings, all the top six Canadian banks beat analyst expectations and posted a slow rebound. Following the earnings report, stocks of Royal Bank of Canada (TSX:RY) and Toronto Dominion (TSX:TD) emerged among the most traded shares on the Toronto Stock Exchange.

With the economic activity is not expected to attain pre-pandemic levels till 2021, these two dividends paying bank stocks are high on investors’ radar. Let us look at RY stocks and TD stocks in detail:

Royal Bank of Canada (TSX:RY)

The top Canadian lender posted net income of C$ 3.2 Billion in its third quarter 2020 results. The figures are down C$ 62 million or two per cent year-over-year (YoY), primarily because of the COVID quarters. The Royal Bank of Canada’s earnings grew in several segments, but the gains were offset by provisions for credit losses and reduced earnings in banking, capital markets, and wealth management divisions due to low interest rates.

Compared to the previous quarter, RBC’s net income rose by C$1.7 billion in Q3 2020.

(Source: Royal Bank of Canada)

In its latest quarter, net income in wealth management was C$ 562 million, down C$ 77 million or 12 per cent YoY. Similarly, net income in insurance, investor & treasury services and capital markets were down six percent, 36 per cent and 45 per cent from a year ago, respectively. The lender its third quarter ended July 31, 2020, with a liquidity surplus of approximately C$ 127 billion. The bank announced C$ 1.08 quarterly dividends.

The Royal Bank of Canada set aside C$ 675 million in total provision for credit losses, due to the evolving impact of the COVID-19 pandemic.

Stocks of Royal Bank of Canada (RBC) are currently down by over 5 per cent year-to-date. The scrips are trading flat in the last three months but have risen by over 4.5 per cent in a month.

RBC stocks have been traded heavily on the Toronto Stock Exchange in the last two months and current feature on the top price performer list of the market.

As per information on the TSX, the shares have a current dividend yield of 4.46 per cent and 12.8 price-to-earnings ratio. RBC (RY) is a blue-chip stock that has paid consistent dividends. Its current EPS or earnings per share stands at C$ 7.83, while return to assets is 13.61 per cent. Its present market valuation is C$ 137 billion.

The shares are trading at C$ 96.91 at the time of writing this.

Toronto Dominion Bank (TSX:TD)

Toronto Dominion stock or TD stocks ranked highly on three TSX stocklists: top price performer, top volume (10-day moving average) and top financial services. The scrips are up 6.4 per cent in a month and have a high dividend yield of almost 5 per cent.

TD stocks lost over 32 per cent of its value at the height of the pandemic-led market crash in March. It has since recovered by 28 per cent. The shares are currently down 12.9 per cent year-to-date.

The C$ 114 billion-lender is a blue-chip stock and a favorite among investors. It distributed C$ 0.79 dividend in the latest quarter and has a current EPS of C$ 5.7. As per data on the TSX, TD stocks have a current P/E ratio of 11.3 while the return on assets is 10.75 per cent.

Toronto Dominion Bank Moving Averages

(Source: TSX)

In its third quarter 2020 earnings statement, the lender reported net income of C$ 2.2 billion, down C$ 2.2 billion or 31 per cent YoY. The bank’s Canadian retail segment reported net income of C$ 1.26 billion, decrease of 33 per cent YoY. US Retail net income stood at C$ 673 million, down 48 per cent YoY.

These income decreases were due to higher provisions for credit losses, low revenues and higher insurance claims, said the lender. It set aside C$ 635 million for bad loans amid the distressing COVID-19 situations.

TD’s wholesale banking net income stood at C$ 442 million in the latest quarter, up 81 per cent YoY.

TD Ameritrade, the online stock investing platform of TD bank, earned C$ 317 million in the third quarter, up eight per cent from a year ago.

In its conclusion statement, the back alluded to the uncertainty and challenges of the economic recovery. TD Economics forecast 4.3 per cent contraction in global real gross domestic product (GDP) in 2020, adding that Canada’s weaker pre-pandemic economic momentum and volatile oil prices can imply a deeper contraction in activity in the first half of the year.