“Almost untouched by the subprime scandal and the subsequent credit fallout, Canada’s banks are strong and their risk of writeoffs are consider by most analysts as minor,” notes Genia Turanova and Gregory Dorsey in Leeb’s Income Performance Letter.

Here, they look at two favorites in the Canadian banking sector: Toronto-Dominion Bank (NYSE: TD) and Royal Bank of Canada (NYSE: RY).

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“Toronto-Dominion and its subsidiaries, collectively known as TD Bank Financial Group, serve more than 14 million customers. The group offers a full range of financial products and services including wholesale banking securities, personal and business banking, wealth management and U.S. personal and commercial banking."

“TD Bank is looking to expand its US presence by acquiring New Jersey-based Commerce Bancorp. After the acquisition is completed, TD’s US banking operations will double. As for the hot topic of all financials these days – its subprime exposure – Commerce Bancorp’s $16 billion loan portfolio has no subprime exposure."

“Overall, TD continues to be comfortable with the credit quality of Commerce’s investment and loan portfolio, and its own portfolios have minimal US subprime exposure. We’re also comfortable with the shares’ 3.5% yield. We are adding the stock to our portfolio."

“Another interesting income stock is Royal Bank of Canada. It’s a diversified financial services company and the largest bank in Canada in terms of assets and market capitalization. The company continually demonstrates strong market positions in all of its business segments."

“As Canada’s largest company, RBC has assets of $605 billion (Canadian), over 1,400 branches across Canada, 70,0000 full and part-time employees worldwide, with offices in over 34 countries. Of note, RBC ranks number 77 on the Forbes Global 2000 list."

“And, according to a global Newsweek ranking, which measures how effectively companies manage environmental risks and opportunities relative to their peers, RBC is the most environmentally-friendly company in the world.”