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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

Bank Stocks

Is BNS Stock a Buy in January 2023?

| Andrew Walker

Bank of Nova Scotia stocks looks cheap right now. Is this a good time to buy or should investors wait?

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If a recession hits us hard in 2023, you'll want the ability to take out cash if you need it.…

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Is Now the Right Time to Buy Canadian Bank Stocks?

| Andrew Button

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2 Bank Stocks to Load Up on in a Recession

| Chris MacDonald

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Bank Stocks

Better Buy: RBC Stock or the Entire TSX?

| Brian Paradza, CFA

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CRA: 3 Big Changes Coming to 2023 Tax Breaks

| Aditya Raghunath

Use the tax breaks to lower your tax bill and purchase blue-chip TSX stocks such as Royal Bank of Canada.

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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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CPP Pensioners: Should You Take Your CPP at 65 or 70?

| Adam Othman

Instead of starting your CPP at 65, you can invest in a stock like Royal Bank and defer your payments…

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Best Dividend Stocks to Buy in Canada March 2020 and Hold Forever

| Kay Ng

Did you buy these best dividend stocks, including TD Bank (TSX:TD)(NYSE:TD) stock, for boosted yields in the stock market correction?…

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Bank Stocks

Canadian Banks: Royal Bank (TSX:RY) Stock vs. TD Bank (TSX:TD) Stock in 2020

| Ambrose O'Callaghan

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stocks were hammered by volatility last week.

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A $20 Billion Housing Crash in America Could Hurt Canada: Are You Prepared?

| Christopher Liew, CFA

The housing market in Canada can come crashing down if a massive crash happens in the United States. Investors should…

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TFSA Income Investors: 2 Top High-Yield Canadian Dividend Stocks on Sale Right Now

| Andrew Walker

Top TSX Index stocks now offer dividend yields above 5%.

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Profit From Buying Canada’s Most International Bank on the Dip

| Matt Smith

Buy attractively valued Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) today despite a weak short-term outlook.

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Now Is the Time to Buy Canada’s Most Profitable Big Bank

| Matt Smith

Buy attractively valued National Bank of Canada (TSX:NA)( today and lock-in a 4% dividend yield.

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Stock Market Crash 2020: Do This in Your Stock Portfolio

| Kay Ng

By buying quality stocks like Royal Bank of Canada (TSX:RY)(NYSE:RY) and a markedly different stock in a stock market crash,…

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Baby Boomers: Can You Live on JUST Your OAS and CPP Pension?

| Christopher Liew, CFA

Choosing between the Vermilion stock and the BMO stock to supplement your OAS and CPP pension depends on your risk…

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Choosing TFSAs or RRSPs depends on your financial goals, and investing in American Hotel Income Properties and Scotiabank can help…

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| Kay Ng

Save more now, so you can save less later! Now's the perfect time to save and invest for your retirement…

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| Kay Ng

Get higher returns from the current market correction, as you get more value for your money right now.

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Market Sell-off: These 3 Dividend Stocks Are a Screaming Buy Today

| Nelson Smith

Great Canadian stocks like Royal Bank (TSX:RY)(NYSE:RY), RioCan REIT (TSX:REI.UN) and Telus (TSX:T)(NYSE:TU) are on sale today. So what are…

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Stock Market Crash 2020: 3 Easy Tips to Keep Your Cool

| Kay Ng

Generate outsized returns from the inevitable recovery of the stock market, while collecting juicy and safe dividend income!

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Buy These 2 Top Dividends Stocks on the Dip

| Mat Litalien, MBA

CCL Industries (TSX:CCL.B) and Equitable Bank Group (TSX:EQB) have entered correction territory after disappointing 2020 outlooks.

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Dividend Stocks

BUY ALERT: This 4.1% Yield Dividend Stock Just Upped its Payout!

| Andrew Button

After posting solid quarterly earnings, Royal Bank of Canada (TSX:RY)(NYSE:RY) increased its dividend.

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TFSA Investors: 3 Dividend Stocks That Just Raised Their Payouts

| David Jagielski

Magna International Inc (TSX:MG)(NYSE:MGA) and these two other dividend stocks are known for paying and increasing their dividends.

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TFSA Investors: 2 Top TSX Index Dividend Stocks to Buy During a Market Crash

| Andrew Walker

The market crash is giving TFSA income investors a great opportunity to pick up some top-quality dividend stocks at a…

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Buy the Dip: Load Up on These 3 Dividend Stocks Today… Before It’s Too Late!

| Nelson Smith

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Market Crash: Canada’s Best Dividend Stocks Are Becoming Cheap

| Haris Anwar

Here is why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is one of the best dividend stocks to buy amid this market crash.

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Bank Stocks

Buy This High-Dividend, Blue-Chip TSX Stock to Set Up Your Retirement

| Jared Seguin

Royal Bank of Canada (TSX:RY)(NYSE:RY) could be the key to a cushy retirement.

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3 Stocks Dividend Investors Have to Own in 2020

| Kris Knutson

It's a great time to buy income stocks like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) as long-term holds. The market doesn't…

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The Best Canadian Bank Stocks to Buy in 2020

| Kay Ng

This is what’s impacting the profitability of the big Canadian banks. Which are the best Canadian bank stocks to buy…

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Don’t Panic! The TSX Stock Market Crash Could Be the Buying Opportunity of a Lifetime!

| Andrew Button

While markets tumble, Canadian stocks like Royal Bank of Canada (TSX:RY)(NYSE:RY) are quietly posting stellar earnings results.

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Retirees: 3 Income Ideas for Your 2020 RRSP

| Chris MacDonald

Need income ideas for your 2020 RRSP? Look no further than Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN), Enbridge (TSX:ENB)(NYSE:ENB), and TD…

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Canada Bank Crash: 2 Top Dividend Stocks to Buy on the Dip

| Ambrose O'Callaghan

Bank stocks are reeling with the TSX Index and global stocks, but this correction may provide a great opportunity to…

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Don’t Believe the 3 Myths That Say Your RRSP Isn’t a Good Way to Save for Retirement

| Christopher Liew, CFA

It’s normal to compare the RRSP with the TFSA, but it's wrong to say the account is not a good…

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TD’s (TSX:TD) Stock Price: Should You Buy the Dip?

| Andrew Walker

The market crash is finally giving investors a chance to buy top Canadian stocks at cheap prices. Is TD (TSX:TD)(NYSE:TD)…

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Bank of Nova Scotia (TSX:BNS) Is Still a Top Bank Stock

| Demetris Afxentiou

While it may no longer be considered Canada's most international bank, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) still holds plenty of…

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TFSA Investors: 3 Big Mistakes to Avoid With Your TFSA

| Stephanie Bedard-Chateauneuf, MBA

Be careful not to overcontribute to your TFSA.

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2 Top Dividend Stocks With Yields of 5%

| Kay Ng

The stock market correction allows you to lock in higher initial yields with quality dividend stocks, including CIBC (TSX:CM)(NYSE:CM) stock.

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Retirees: 2 High-Yield Dividend Stocks to Buy on a Market Correction

| Andrew Walker

The stock market correction is giving income investors an opportunity to buy top dividend stocks at low prices.

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2 Must-Own Stocks for a Lifetime of Safe Dividends

| Christopher Liew, CFA

The dividend growth streaks of the Canadian Western Bank stock and Enbridge stock are the compelling reasons why both companies…

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Market Crash: 2 Top Canadian Dividend Stocks to Buy in a Market Correction

| Andrew Walker

Buying top dividend stocks on market corrections is a proven strategy for building long-term wealth.

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RRSP Investors: 2 Cheap Canadian Stocks to Own for 30 Years

| Andrew Walker

These two stocks appear cheap today and deserve to be on your RRSP radar.

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Are the Canadian Banks Still Investable Amid Macro Headwinds?

| Joey Frenette

Investors should opt for quality over cheapness with stocks like National Bank of Canada (TSX:NA) when going on the hunt…

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Dividend Stocks

TFSA Investors: Here’s How Your Tax-Free Balance Could Be $1 Million

| Christopher Liew, CFA

With the Laurentian Bank stock and SmartCentres stock plus a holding period of at least 35 years, TFSA investors could…

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Bank Stocks

3 Big Mistakes to Avoid With Your RRSP

| Mat Litalien, MBA

The RRSP contribution deadline is March 2, 2020. Be wary of these mistakes if you are making a last-minute investment…

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Dividend Stocks

Retire 5 Years Earlier With 6 Simple Steps

| Christopher Liew, CFA

People who were able to retire early took the necessary steps. A careful financial deliberation and investments in blue-chip assets…

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Dividend Stocks

RRSP Pension Builders: Dividend Stocks to Buy Before the 2020 RRSP Deadline

| Adam Othman

Brookfield Renewable and Toronto-Dominion Bank stocks could be ideal investments to consider before the 2020 RRSP deadline.

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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.