3 Bank Stocks That Are Too Cheap to Ignore

Contrarian investors now have the opportunity to purchase Canadian banks at bargain prices for portfolios centered on total returns and passive income thanks to the collapse in share prices of select Canadian bank stocks during the 2022 market slump.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS) experienced a decline of more than 25%. The shares are now trading at about $65 vs. their $95.95 peak from 2022. This is a significant decline for a business that actually produced higher adjusted earnings in 2022 than it did in 2021, a successful year for the bank.

Investors may be concerned that if the world economy collapses, Bank of Nova Scotia’s international operations, which are predominantly based in Mexico, Peru, Chile, and Colombia, could suffer significantly. Again, this is conceivable, but these nations also strongly rely on the price of oil and copper, which might continue to rise even if economic activity slows.

Investors who buy BNS bank stocks at the current price can get a 6.3% dividend yield.


CIBC (TSX:CM) trades for $55 at the time of writing compared to more than $83 at the 2022 peak. For the year, the share price is down 26%.

At the June meeting, CIBC informed investors that it anticipates earnings to increase by at least 7% annually over the medium term, driven by expansion in the commercial and wealth operations in the United States. Even when CIBC increased the dividend twice this year, the market doesn’t seem to be persuaded, so only time will tell if it turns out to be the case.

Investors may be concerned about the Canadian property market. Compared to its market capitalization, CIBC’s portfolio of Canadian residential mortgages is sizable. The housing market might collapse as a result of defaults or people being obliged to try to sell their residences if rising mortgage rates and a rise in unemployment coexist. There would be a pain if the banks were forced to sell homes that were worth less than the mortgages still owing, and CIBC would likely take a bigger blow than its competitors.

Again, this is an extreme situation that is not expected to occur.

At just 8.25 times trailing 12-month earnings, CIBC stock also appears oversold and now offers a 6.2% dividend yield.


Compared to the other two, TD (TSX:TD) has performed better this year. The stock is down around 12% in 2022, and at $88.50, it is now trading above the July low of around $77 but still much below the 2022 high of $109.

TD easily outperformed the 2021 performance in terms of the fiscal year 2022 earnings. The bank stated in its fourth-quarter report that, barring a significant macroeconomic shock, it expects to expand its profitability by 7–10% in 2023.

To boost future revenue and profit growth, TD amassed a war chest of cash during the pandemic and is investing a sizable portion in acquiring two acquisitions in the United States.

TD trades at an attractive 9.25 times trailing 12-month earnings and provides a 4.4% dividend yield.

The bottom line on cheap bank stocks

All three companies Bank of Nova Scotia, CIBC, and TD pay appealing dividends that ought to increase over time. While there are always risks, the bank stocks now seem to be undervalued and should be on your radar if your contrarian portfolio focuses on total returns and passive income.