Positioning for Canadian Bank Earnings Season

Nov. 25, 2025

As Canadian banks report fiscal year-end earnings, investors may consider buying BMO’s Bank ETFs for their upside potential, diversification and steady cash flow.

BMO has the largest and most liquid bank ETFs in Canada with combined AUM (Assets Under Management) of $8.3 billion.¹ Both of BMO’s Canadian bank ETFs take an equal-weight approach to minimize any concentration risk to a particular name. When dispersions happen in performance with certain individual banks, the semi-annual rebalancing will bring the holdings back to an approximate equal weight and in turn allow an investor to take those profits and add to other quality banks within the ETF. The equal-weight strategy utilized for ZEB and ZWB can act as a hands free ‘buy low, sell high’ strategy.

Featured ETFs

BMO Equal Weight Banks Index ETF (Ticker: ZEB)

BMO Covered Call Canadian Banks ETF (Ticker: ZWB)

Benefits

ZEB provides equal-weight exposure to large, diversified Canadian bank stocks
ZWB call option writing reduces volatility while producing monthly cash distributions

Historically, Canadian banks are known for steady and attractive dividends, which have continued to rise over time, which bodes well for income seeking investors. Equal weight bank ETFs capture dividends from all holdings, creating competitive cash flow for investors. ZEB and ZWB boast annualized distribution yields of 3.2% and 6.1%, respectively.² Furthermore, it is important to note that instead of receiving quarterly dividends (as one would with holding bank stocks individually), when investing in ZEB and ZWB, investors are able to benefit from the consistent monthly distributions they provide.

BMO Global Asset Management, as of October 31, 2025

Investors may consider buying BMO’s bank ETFs given the wide performance dispersions between individual Canadian banks of late (see table below). One may have the opinion that not all banks are considered equal. Indeed, the dispersion is illustrated in the performance spread between TD and National Bank, which was as wide as 33% over the last 12 months. ³ BMO’s equal weight strategy is designed to remove concentration risk in a particular stock. The recent volatility among certain individual Canadian banks, has helped highlight the more stable returns from ZEB and ZWB²which hold all names across the sector equally, thereby smoothing out total performance

Source: Bloomberg 12-month period ending October 31, 2025.

Overall, Canadian banks have been proven resilient over time, with a track record of stability through market cycles. Canadian banks operate in a well-regulated, oligopolistic market, historically weathering downturns better than many global peers (including during the Great Financial Crisis).³ Over the past 10 years the annualized performance of BMO’s bank ETFs has been positive for investors, with ZEB returning 12.4% and ZWB returning 9.7%.¹ That’s an approximate cumulative return of 257% with ZEB and 167% with ZWB.¹Moreover, over the last 10 years the Canadian banks have been the darling of the TSX Capped Composite, outperforming the broader index by approximately 300bps.

Return Comparison, Canadian banks vs index

Fund name	Ticker	YTD	1 Y	3 Y	5 Y	10 Y	Since Inception	Inception date
BMO Equal Weight Banks Index ETF	ZEB	30.9%	36.5%	21.1%	21.5%	13.6%	12.4%	2009-10-20
BMO Covered Call Canadian Banks ETF	ZWB	23.9%	28.7%	15.8%	16.0%	10.4%	9.7%	2011-01-28
BMO S&P/TSX Capped Composite Index ETF	ZCN	25.04%	28.64%	19.43%	17.58%	11.68%	9.38%	2009-05-29

Bloomberg, as of October 31, 2025

Implementation

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).

¹ AUM Flows, Performance source Bloomberg October 31, 2025

²Annualized Distribution Yield as of October 31, 2025: 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.

³ Bloomberg October 31, 2025

Disclaimer

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.

Commissions, management fees and expenses all may be associated with investments in exchange-traded funds. Please read the ETF Facts or prospectus of the BMO ETFs before investing. Exchange-traded funds are not guaranteed, their values change frequently and past performance may not be repeated.

For a summary of the risks of an investment in the BMO ETFs, please see the specific risks set out in the BMO ETF’s prospectus. BMO ETFs trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.

BMO ETFs are managed and administered by BMO Asset Management Inc., an investment fund manager and a portfolio manager, and a separate legal entity from Bank of Montreal.

Distribution yields are calculated by using the most recent regular distribution, or expected distribution, (which may be based on income, dividends, return of capital, and option premiums, as applicable) and excluding additional year end distributions, and special reinvested distributions annualized for frequency, divided by current net asset value (NAV). The yield calculation does not include reinvested distributions.

Distributions are not guaranteed, may fluctuate and are subject to change and/or elimination. Distribution rates may change without notice (up or down) depending on market conditions and NAV fluctuations.

The payment of distributions should not be confused with the BMO ETF’s performance, rate of return or yield. If distributions paid by a BMO ETF are greater than the performance of the investment fund, your original investment will shrink. Distributions paid as a result of capital gains realized by a BMO ETF, and income and dividends earned by a BMO ETF, are taxable in your hands in the year they are paid.

Your adjusted cost base will be reduced by the amount of any returns of capital. If your adjusted cost base goes below zero, you will have to pay capital gains tax on the amount below zero.

Cash distributions, if any, on units of a BMO ETF (other than accumulating units or units subject to a distribution reinvestment plan) are expected to be paid primarily out of dividends or distributions, and other income or gains, received by the BMO ETF less the expenses of the BMO ETF, but may also consist of non-taxable amounts including returns of capital, which may be paid in the manager’s sole discretion. To the extent that the expenses of a BMO ETF exceed the income generated by such BMO ETF in any given month, quarter, or year, as the case may be, it is not expected that a monthly, quarterly, or annual distribution will be paid. Non-resident unitholders may have the number of securities reduced due to withholding tax. Certain BMO ETFs have adopted a distribution reinvestment plan, which provides that a unitholder may elect to automatically reinvest all cash distributions paid on units held by that unitholder in additional units of the applicable BMO ETF in accordance with the terms of the distribution reinvestment plan. For further information, see the distribution policy in the BMO ETFs’ prospectus.

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