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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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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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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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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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How to Invest the $6,000 TFSA Contribution Increase and Turn it Into $150,000

| Andrew Walker

It is possible for Canadians to build a substantial pension fund using the TFSA. Here's how.

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Are Canadian Banks Too “Toxic” to Hold Through 2020?

| Joey Frenette

CIBC (TSX:CM)(NYSE:CM) is the cheapest Canadian bank by far, but here's why now is not the time to back up…

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2 High-Yield Dividend Stocks to Buy and Hold Forever

| Adam Othman

Looking for dividends? Look at Scotiabank stock and CIBC stock to buy and hold forever and receive high yields.

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2 High-Yield (+6%) Canadian Dividend Stocks to Buy in February

| Victoria Hetherington

Russel Metals Inc. (TSX:RUS) and one other Canadian stock offer big yields to investors seeking passive-income assets this month.

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The Best Way to Use Your TFSA Limit in 2020

| Haris Anwar

Have an unused TFSA limit? Use it to buy dividend growth stocks, such as Canadian National Railway Co. (TSX:CNR) (NYSE:CNI).

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RRSP Investor Alert: $10,000 Invested in RBC (TSX:RY) Stock 20 Years ago Would Be Worth This Much Today

| Brian Paradza, CFA

Long-term dividend-growth investing can create wonderful wealth accumulation, even when slower-growth, large-cap value plays like Royal Bank of Canada (TSX:RY)(NYSE:RY)…

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Royal Bank of Canada (TSX:RY) vs Telus (TSX:T): Which Stock Is a Better Buy?

| Andrew Button

Royal Bank of Canada (TSX:RY)(NYSE:RY) is a solid dividend stock, but is a telecom giant a better buy?

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Pension $1 Million: Top Canadian Dividend Stocks to Own for Decades

| Andrew Walker

It's possible to retire wealthy. Here's how.

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TFSA 101: How to Earn $260 Per Month and Pay No Tax to the CRA

| Andrew Walker

Here's how Canadian investors can get the most out of their TFSA.

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3 Gripping Consequences of Not Saving Enough

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Not saving enough could lead to bitterness and regret in the sunset years. Don’t throw your financial future away and…

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TFSA Pension: How to Invest in Top Canadian Stocks and Build a Wealth Fund for Retirement

| Andrew Walker

Owning top dividend stocks for the long haul can make investors wealthy. Here's how.

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2 Tough Challenges Facing Canadian Investors in 2020

| Adam Othman

With a rising debt crisis and lack of savings, Canadians might want to consider investing in a stock like Toronto…

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TFSA Investors: TFSA Losses Are Forever — Be Mindful of a Possible 2020 Recession

| Christopher Liew, CFA

The threat of Canada entering a recession in 2020 exists. However, low-risk assets like the BCE stock and Toronto Dominion…

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CPP Pension User: 2 Reasons You Should NOT Take Your CPP at 60

| Christopher Liew, CFA

Larger pension and inflation protection for life await retirees who can delay taking the CPP. The minimum requirements are income…

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Passive Income: 3 Dividend Stocks on Sale

| Kay Ng

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5 Canadian Dividend Stocks With +5% Yields to Pack in a TFSA

| Victoria Hetherington

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2 Smart Ways to Reach Your Financial Goals in 2020

| Adam Othman

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| Adam Othman

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Should Investors Still Buy These 3 Top Canadian Bank Stocks?

| Victoria Hetherington

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and two other stocks are restructuring. But is it a buying opportunity?

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Baby Boomers: Can You Comfortably Retire With Less Than $500,000?

| Nelson Smith

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Worried About Your Retirement? Invest in These 3 Stocks Today!

| David Jagielski

Waste Connections Inc (TSX:WCN)(NYSE:WCN) and these two other stocks are buy-and-forget investments that can help any investor grow their portfolio.

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Bank Stocks

TFSA Investors: Try This 3-Step Tax-Saving Trick Before the 2020 RRSP Deadline

| Christopher Liew, CFA

Hate taxes? Try this neat trick with your TFSA and RRSP to save on taxes. Buy Scotiabank stock and grow…

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TFSA Investors: Why NOT to Invest $6,000 Now

| Kay Ng

Here's 1 top reason and 3 examples why you would refrain from investing in your TFSA right now.

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Retirees: 2 Income Stocks You Need to Buy Today

| Kris Knutson

Earning income from investments in retirement is harder than it ever has been before, but owning stocks like BCE Inc.…

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RRSP Investors: A Top Canadian Stock for Building Retirement Wealth

| Andrew Walker

Owning a balanced portfolio of top dividend stocks is a proven strategy for creating RRSP wealth.

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Canada Revenue Agency: 2 Steps to Stay Ahead of the CRA With Your RRSP

| Christopher Liew, CFA

Make early contributions to your RRSP and invest in National Bank of Canada stock and Magna stock to build wealth.…

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Investors: This Bank Stock Is Embarrassingly Cheap

| Nelson Smith

Take advantage of this glorious buying opportunity and add CIBC (TSX:CM)(NYSE:CM) shares to your portfolio today.

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RRSP Season: A Top Stock to Help Canadian Investors Retire Wealthy

| Andrew Walker

It's still possible to retire rich.

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Is February a Good Month to Buy Toronto-Dominion Bank (TSX:TD) Stock?

| Haris Anwar

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a dividend-growth stock that is looking attractive after recent weakness.

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Avoid Canada Revenue Agency OAS Clawbacks: 2 Steady Dividend Stocks for TFSA Income Investors

| Andrew Walker

Pensioners now have a way to earn more income on their savings while also protecting their OAS payments.

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How Much in Dividends You’ll Receive With $10,000 Invested in TD Bank (TSX:TD) Stock

| Cindy Dye

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) offers more than just a nice dividend; the bank’s growing presence outside Canada is what excites most…

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Top Dividend Stocks for 2020

| Ryan Vanzo

Classic dividend stocks like Enbridge Inc (TSX:ENB)(NYSE:ENB) should deliver, but other hidden picks could surprise the market.

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Not Sure When to Take Your CPP Pension in 2020? Read This!

| Christopher Liew, CFA

Taking the CPP early or late has its pros and cons. But a retiree usually decides based on circumstance. Regardless…

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Buying This Bank Today Can Make You Rich Tomorrow

| Demetris Afxentiou

There are countless short-term advantages to investing in Toronto Dominion Bank (TSX:TD)(NYSE:TD), but none can compare to the immense long-term…

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TFSA Investors: 3 High-Yield Dividend Stocks to Buy in February

| Andrew Button

If you're looking for high yield, consider Enbridge Inc (TSX:ENB)(NYSE:ENB) stock

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Bank Stocks

RRSP 2020 Deadline: 2 Top Canadian Stocks for Self-Directed Pension Investors

| Andrew Walker

The RRSP is still an important tool for helping Canadians set aside cash for retirement.

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TFSA Income Investors: How to Create a 5% Yielding Dividend Growth Portfolio

| Brian Paradza, CFA

You could create a safe 5% yielding TFSA portfolio of Canadian dividend growth stocks without taking on much risk with…

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1 Stock to Buy, 1 Stock to Hold, 1 Stock to Sell

| Chen Liu

In the current climate, I would buy Yangarra Resources Ltd, hold North West Company Inc, and sell National Bank.

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Bank Stocks

Want Financial Freedom? 2 Stocks Are All You Need!

| Chen Liu

Pairing a growth stock like Goodfood Market Corp with a dividend-paying stock like Bank of Montreal is the best bet.

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Dividend Stocks

TFSA Income Investors: 3 High-Yield Stocks to Boost Pension Earnings and Protect OAS Payments

| Andrew Walker

Here's how Canadian retirees can increase income without being hit by the OAS clawback.

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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.