Canada’s bank stocks are historically expensive. No one seems willing to bet against them
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Big Six Canadian banks trade at a forward P/E of roughly 16.5, well above the two-decade average of ~11, with even Bank of Nova Scotia — the cheapest — described in the source as exceptionally pricey by historical standards.
- Canada's banking sector has rallied 64% over the past year on a currency-adjusted basis, roughly three times the return of the Roundhill Magnificent Seven ETF that tracks top U.S. tech stocks.
- Canadian bank profits have held up quarter after quarter despite competition from fintechs and a sluggish economy slammed by tariff uncertainty, per the source.
- The Big Six account for nearly one-quarter of the S&P/TSX Composite Index's value, making the run-up a major driver of Canadian investor wealth.
- Global fund managers remain split: a Scotiabank survey by strategist Hugo Ste-Marie found 42% had trimmed exposure to Canadian banks while 58% were holding for further gains.
- Short interest in the Big Six has dropped to its lowest level in years, with the source noting this month marks exactly a decade since the peak of the "short Canada" trade that ended with the banking index closing 2016 up 26% and short sellers nursing huge losses.
Why it matters: With the Big Six making up nearly one-quarter of the TSX Composite, Canadian investors carry outsized exposure to these record valuations, so any reversal would hit domestic portfolios disproportionately. A decade after the failed "short Canada" trade burned bearish betters, even valuation-sensitive fund managers are reluctant to stand in front of an oligopoly that has reliably churned out profits through tariff shocks and fintech disruption.
