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Bank Stocks

What are bank stocks?

Bank stocks represent partial ownership in a financial institution that’s licensed to hold and loan money. Over time, bank stocks have been relatively safe investments, as they offer products and services that most people need.

How do you choose a good bank stock? 

1. Look at the bank’s profitability

First, you want to be sure the bank is even profitable. To do that, you can use the following metrics. 

  • Return on equity (ROE): this metric tells you how much profit a bank makes from its shareholder’s equity. The higher this metric, the more efficient a bank is using its stakeholder’s money. 
  • Return on assets (ROA): the ROA tells you the overall profit a bank makes in relation to its assets. The higher the ROA, the more profit a bank makes from its assets. 
  • Efficiency ratio: the efficiency ratio tells you how much revenue a bank uses towards its operating costs. The lower the efficiency ratio, the more revenue a bank theoretically has. 

2. Assess the bank’s risks 

One of the biggest risks a bank has is losing money on an outstanding loan. As with profitability, a couple metrics could help you see how much banks are losing.

  • Nonperforming loans ratio (NPL): Nonperforming loans are loans that are at least 90 days past their due date. A bank with a low percentage of NPL (2% is a good ratio) is doing fairly well collecting loan repayments from its customers. 
  • Net charge-offs: a net charge-off is a bank’s declaration stating that a loan hasn’t been paid and is unlikely to be paid. As with NPLs, the less net charge-offs a bank has, the less money it’s losing on outstanding loans. 

3.  Check back here for our top picks 

Finally, we’ll keep this page updated with our staff writer’s reviews and assessment of Canada’s bank stocks. Our writers often use these metrics to help investors see which bank stocks are doing well and which are doing poorly. 

Check back here for the most up to date information about bank stocks in Canada.

Top Articles

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| Brian Paradza, CFA

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| Aditya Raghunath

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The 1 TSX Stock I’d Go All-In On

| Andrew Button

TD Bank (TSX:TD)(NYSE:TD) stock is out of favour now but could come back in a big way.

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Recent Bank Stocks News

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Bank of Nova Scotia: Buy, Sell, or Hold in 2025?

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Is Bank of Nova Scotia Stock a Buy While it’s Below $71?

| Andrew Walker

Bank of Nova Scotia is down more than 8% in 2025. Is BNS stock now oversold?

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CIBC (TSX:CM) stock looks like a cheap momentum bet for 2025.

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Bank of Nova Scotia: Buy, Sell, or Hold in 2025?

| Kay Ng

If you’re looking for a steady income stream with moderate growth potential, Bank of Nova Scotia stock is a reasonable…

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Better Banking Stock: Royal Bank vs. CIBC Stock

| Amy Legate-Wolfe

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Outlook for TD Bank Stock in 2025

| Andrew Button

The Toronto-Dominion Bank (TSX:TD) has been rising rapidly in 2025. Can it keep up the performance?

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Better Banking Stock: CIBC vs National Bank?

| Chris MacDonald

Among Canadian banking stalwarts, 2 smaller banks have some of the best growth upside, partly due to their size.

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Outlook for CIBC Stock in 2025

| Joey Frenette

CIBC (TSX:CM) stock looks like a great bargain for 2025 and beyond.

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Where Will TD Stock Be in 3 Years?

| Jitendra Parashar

Despite some recent setbacks, here’s why TD stock could deliver strong returns in the coming years.

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Better Banking Stock: Bank of Montreal vs Bank of Nova Scotia

| Andrew Walker

Bank of Montreal and Bank of Nova Scotia are up considerably in the past six months. Is one headed higher…

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| Amy Legate-Wolfe

You don't have to get the biggest growth stock or highest dividend yield for superb, stable passive income.

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Outlook for Bank of Nova Scotia Stock in 2025

| Jitendra Parashar

Despite short-term macroeconomic challenges and uncertainties about interest rate moves, Scotiabank’s growth outlook for 2025 and beyond remains strong with…

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Frequently Asked Questions

Why invest in bank stocks?

Quality bank stocks have a strong history of generating profits and managing crises, making them a great investment.

In addition to their strong performance, many of Canada’s top banks pay dividends, with payouts that increase over time. For Canadian investors looking to pocket a little extra from their stocks, dividends can help you buy more shares or more cash.

Finally, bank stocks can help diversify your investing portfolio. If you already have stocks in other sectors (mining, technology, energy), bank stocks could add much needed stability, as well as expose you to the gains in another sector.