After several years of choppy performance, Canadian bank stocks are finally enjoying a strong recovery in 2025 — and two standout names have delivered exceptional returns. While the past few years were marked by volatility and muted price appreciation, patient investors who bought during the downturn between 2022 and 2024 are now sitting on solid gains — not to mention locked-in, above-average dividend yields.
Even though recent price appreciation has slightly reduced the upfront dividend appeal, the big banks still play a critical role in driving the Canadian stock market forward. In this article, we’ll take a closer look at two of the top-performing bank stocks: Royal Bank of Canada (TSX:RY) and Bank of Montreal (TSX:BMO). Both have more than doubled in value over the past five years — with RY up 108% and BMO up 113% as of this writing — despite facing a major bear market just a couple of years ago.
Let’s explore what’s driving these gains and which bank might be the better buy going forward.
Also Read: Best Canadian stocks 2025
Royal Bank of Canada (TSE:RY)
As Canada’s largest publicly traded company with a market cap of $285 billion, Royal Bank continues to demonstrate why it’s a cornerstone of many portfolios. Known for its diversified business model and powerful capital markets division, RY stands out from the rest of the Big Six banks.
The stock is up over 17% year to date and 22% in the last 12 months, currently trading at a 15.2x trailing P/E — a bit richer than peers, but arguably justified by its consistent performance. The bank’s most recent earnings report was a standout, beating expectations. However, CEO Dave McKay maintained a cautious tone, warning of potential headwinds including a possible recession, stagflation risks, and trade tensions.
This prudent stance could help keep investor expectations realistic while positioning Royal Bank to weather whatever challenges the Canadian economy may face. Given its strong fundamentals and leadership, RY remains well-equipped to navigate uncertain waters.
Also Read: Long term investing for beginners
Bank of Montreal (TSE:BMO)
While the ultra-attractive 5% dividend yields and low single-digit P/E ratios may be behind us — thanks to rising stock prices and falling interest rates — BMO still offers a compelling long-term case.
Provisions for credit losses and other short-term pressures appear to be easing, opening the door for more earnings surprises ahead. BMO has been one of the top performers on the TSX this year, with the stock gaining nearly 55% over the past 12 months. Despite its recent run-up past $173 per share, the stock still offers value — especially for investors with a longer-term horizon.
The current dividend yield of 3.8% may be lower than in previous years, but dividend growth remains likely. Investors who buy now — or add gradually on any pullbacks — could benefit from both future income increases and capital appreciation.
Like Royal, BMO’s leadership is also taking a cautious approach, signaling thoughtful risk management as the bank navigates an uncertain economic outlook.
Bottom Line
Royal Bank and Bank of Montreal have both delivered more than 100% total returns over the past five years, making them standout performers in the Canadian financial sector. While neither is as cheap as it was during the downturn, both still offer attractive long-term potential — particularly for investors seeking a mix of stability, dividend income, and growth.
If you’re looking to re-enter the Canadian banking sector or add to existing positions, both RY and BMO are worth considering — especially as they continue to outperform in a recovering economy.
Sign Up For our Newsletters to get latest updates
