But for investors looking for a lower-risk option in 2026, Canadian banks stand out. The country’s Big Six lenders are much less sensitive to volatile commodity prices than mining companies. Because most of their income comes from recurring domestic revenues, their exposure to external shocks is lower. Furthermore, the long-standing track record suggests that dividend payments will remain safe and sustainable.
Pillars of stability
The TSX big bank stocks are a lower-risk pick for three compelling reasons. Their strong capital positions act as a buffer against economic volatility. Diversified domestic income limits the impact of global shocks, and stable dividends provide healthy long-term returns for risk-averse investors.
Fitch Ratings expects the Canadian banking sector to face challenges in 2026. Increased geopolitical risks at the start of the year, along with trade tensions and higher consumer debt, are cited as significant headwinds. Still, the global credit rating agency expects banks to maintain solid financial profiles and achieve increasing profitability.
Solid income
Canada’s Big Six reported robust earnings growth in fiscal 2025, particularly in the fourth quarter. In the three months ended October 31, 2025, all exceeded expectations for earnings per share (EPS). Strong lending volumes and improved capital markets activity overshadowed increases in loan loss expenses and provisions (PCLs).
The annual results reflect resilience, aided by diversified revenue streams. Investors are happy with profitability, even in a challenging economic environment. Only the Toronto Dominion Bank reported a year-over-year profit decline (-10% to $3.3 billion) in the fourth quarter, although earnings per share rose to $2.18, compared to analyst expectations of $2.01.
Dividend pioneer Bank of Montreal (TSX:BMO) saw its earnings (adjusted basis) increase 63% year-over-year to $2.51 billion compared to the fourth quarter of fiscal 2024. BMO also increased its quarterly dividend by 2.5% following PCL’s significant decline from $1.25 billion to $755 million.
In addition to BMO, Canadian Imperial Bank of Commerce, Royal Bank of Canada, National Bank of Canadaand TD announced dividend increases. The Bank of Nova Scotia kept its quarterly dividend stable.
Most attractive option
BMO appears to be the most attractive option among Canada’s elite group. The significant decline in the number of PCLs, including the US operations, indicates stabilized, if not cleaner, credit trends. This bank stock continues to gain momentum and is up 21.6% over the past six months.
In fiscal 2025, net profits rose 19.1% to $8.7 billion compared to fiscal 2024. According to Darryl White, CEO of BMO Financial Group, revenues rose across all of the bank’s diversified businesses. “We enter 2026 in a position of financial strength. We are deploying capital to drive future growth and higher shareholder returns,” he said.
BMO is Canada’s oldest financial institution. The $130.8 billion bank is 208 years old and has a dividend track record of 196 years. The acquisition of Bank of the West in the US gives BMO superior diversification and a balanced revenue mix. If you invest today, the stock price is $184.56, while the dividend yield is 3.62%.
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