Bank on Canadian Banks

A Tactical Time to Add Bank ETFs to Your Portfolio

Dec. 7, 2023

As 2023 draws to a close, Canadian Banks have become increasingly attractive. Investors may want to consider increasing their positions to the sector not only for their sustainable yields but, for the upside potential as well. 

Featured ETFs:

  • The recent quarterly earnings were constructive for Canadian banks, despite Scotia starting off reporting with a 23% EPS miss. The rest of the banks in general picked up the slack, with most of them commenting on manageable credit exposures, particularly with the backdrop of increasing projections of a soft landing.2
  • While economic outlook still challenges the banks and growth more broadly, the resilience of the consumer, labour markets, and improving market sentiment bodes well. Canadian banks continue to trade at attractive valuations on a Dividend Yield, P/E and P/B level. Currently the banks have an average P/E of 9.8 and an average P/B of 1.2 which is below its historical average P/E of 12.14 and P/B of 1.93 (since January of 2004).3
  • Price action has been very constructive over the last month, and we have seen some momentum with the Solactive Equal Weight Canadian Banks index as performance was up for the month of November by 8.47%.4

Calendar Performance:



1 Month

3 Month

6 Month

1 Year

3 Year

5 Year

Since Inception

Solactive Equal Weight Canadian Banks Index









  • BMO, Royal, TD, CIBC, and National Bank all raised Dividends for the next quarter. After the COVID moratorium on dividend hikes, bank dividend growth is firmly back on track with a 3yr dividend growth of 8% annualized.5 Overall, Canadian banks have a reliable dividend payment; ZEB and ZWB have an annualized distribution yield of 5.29% and 7.95%.1
  • Both ZEB and ZWB are quite compelling, low-cost solutions to gain exposure to CAD banks. Despite challenging markets, ZEB and ZWB have gathered over $1.1 billion of AUM flows in 2023.6
  • The Central Banks appeared to have stopped raising rates for the time being and have signaled that the high interest rates are working its way through the economy and pushing down inflation. The BoC believes that existing rates may be restrictive enough to bring inflation down further, which may prove as a tailwind for Canadian banks.


For exposure to an approximate equal weighted basket of Canadian Banks consider buying BMO Equal Weight Banks Index ETF (ticker: ZEB) with an enhanced yield component the BMO Covered Call Canadian Banks ETF (ticker: ZWB) or for an accelerated option see the new BMO Canadian Bank Accelerator ETF (ticker: ZEBA).

1 Annualized Distribution Yield as of November 24, 2023: The most recent regular distribution, or expected distribution (excluding additional year-end distributions), annualized for frequency, divided by current NAV. Source: BMO Global Asset Management.

2 Bank earnings source: Bloomberg December 52023.

3 Source for P/E ratios for ZEB – BMO Equal Weight Banks ZBK - BMO Equal Weight US Banks Index ETF, ZWB – BMO Covered Call Canadian Banks: Bloomberg December 62023.

4 Calendar Performance source: Bloomberg November 302023.

5 Canadian banks 3-year dividend growth rate source: Bloomberg December 52023.

6 AUM flows source BMO Global Asset Management November 302023.

This article is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Particular investments and/​or trading strategies should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance. 

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