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Is it Time to Buy This Canadian Bank ETF?

Several top Canadian banks have released their second quarter 2020 results in late May. There was considerable anticipation ahead of this earnings season. Analysts have been dreading bank earnings in the wake of the devastating COVID-19 pandemic and the lockdowns that have ravaged the economy.

Today, Royal Bank (TSX:RY) and Bank of Montreal (TSX:BMO) unveiled their earnings. Profits at both major banks were halved compared to the previous year. Royal Bank’s earnings came in at $1.03 per share, which fell way short of analyst expectations.

Like with Scotiabank (TSX:BNS) and National Bank (TSX:NA), these two saw a massive spike in loan loss provisions. Royal Bank increased its provisions to $2.8 billion in Q2 – up from $426 million in Q2 2019.

The huge increase in loan loss provisions illustrates how damaging the COVID-19 pandemic has been for Canadians. Scotiabank has seen roughly 300,000 of its customers opt for loan deferrals.

 Regardless, the BMO Equal Weight Banks ETF (TSX:ZEB) has climbed 10% over the past week as of close on May 27. This ETF seeks exposure to the Big Six Canadian banks.

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The second-quarter earnings season has been brutal thus far, but investors appear to be optimistic about the future. Canadian banks have proved resilient in the modern era, and there are positive signs as provinces look to reopen the economy.

Investors who are seeking broad exposure to Canada’s top banks may want to consider this ETF in late May. It possesses a 0.61% MER and offers solid $0.10 monthly dividend, representing a strong 4.9% yield.