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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

Some bank stocks, like Toronto-Dominion Bank (TSX:TD) are doing well; others, not so much. Is it time to buy bank…

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2 Bank Stocks to Load Up on in a Recession

| Chris MacDonald

Here are two top Canadian bank stocks investors may want to consider, particularly as we potentially head into a recession.

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Bank Stocks

Better Buy: RBC Stock or the Entire TSX?

| Brian Paradza, CFA

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Bank Stocks

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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Bank Stocks

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

Dividend Stocks

Identifying Opportunities in Latin America for 2020

| Matt Smith

Buy Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) today and benefit from Latin America's return to growth.

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Dividend Stocks

Retirees: Make Your Money Last Longer With These 3 Dividend Stocks

| Christopher Liew, CFA

The Bank of Montreal stock, Canadian Utilities stock, and Algonquin Power stock are the proven safety nets of retirees needing…

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Turn Your $69,500 TFSA Into $500,000 the Easy Way

| Adam Othman

Learn how to utilize the maximum contribution room in your TFSA to reach your financial goals in the easiest way…

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Ranking the Best Canadian Banks to Buy in 2020 (and Beyond!)

| Nelson Smith

2020 looks to be a great year for Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), TD Bank (TSX:TD)(NYSE:TD) and CIBC (TSX:CM)(NYSE:CM).

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Prep Your RRSP, Because 1 Major Mistake Can Be Penalized by the CRA

| Christopher Liew, CFA

The RRSP is an ideal for retirees. Resist making early withdrawals to avoid tax penalties. Instead, grow your retirement savings…

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50% of Canadian Millennials Are Making This Serious TFSA Mistake

| Adam Othman

Avoid making this mistake that half of Canadian millennials are making and consider investing in stocks like Royal Bank to…

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2 Cheap but Excellent Dividend Stocks to Buy for Your TFSA

| Mat Litalien, MBA

Despite hitting new highs, there is still value to be found in the markets. Case in point - The Bank…

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Bank Stocks

TFSA Users: Avoid the Same Massive Mistake as 43% of Canadians

| Christopher Liew, CFA

Are you making a huge TFSA error, like 43% of Canadians? Don't just save in your TFSA, but invest in…

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Bank Stocks

How Much Income Will You Have in Retirement? 3 Easy Steps to Get You Started

| Christopher Liew, CFA

Retirement can be complicated, and figuring out your income sources can be an annoyance. Look at your CPP, work pension,…

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Retirees: Use These 3 Stocks to Supercharge Your CPP Pension

| Nelson Smith

Slate Retail REIT (TSX:SRT.UN), Rogers Sugar (TSX:RSI), and Laurentian Bank (TSX:LB) can really help supplement a meagre CPP.

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Bank Stocks

Canadian Parents: The RESP Guarantees $7,200 “Free” Money for Your Children

| Christopher Liew, CFA

The RESP is the best way to save for your child's education. Invest in TD stock to unlock the power…

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Journey to Wealth: 3 Dividend Stocks for Retirement Planners

| Christopher Liew, CFA

Anyone looking ahead to retirement can start the journey to wealth by investing in the Bank of Montreal stock, BCE…

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Bank Stocks

RRSP Investors: 2 Canadian Stocks to Diversify a Self-Directed Pension Fund

| Andrew Walker

RRSP investors can get global exposure through top-quality Canadian stocks. Here's how.

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Dividend Stocks

TFSA Investors: Can goeasy (TSX:GSY) Stock Double Your Money Again in 2020?

| Mat Litalien, MBA

Last January, goeasy Ltd (TSX:GSY) stock was my top pick for the month. It has almost doubled and is due…

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1 TFSA High-Yield Dividend Stock to Buy and Never, Ever Sell

| Adam Othman

Bank of Montreal stock might deserve a permanent place in your investment portfolio as one of the buy-and-forget stocks.

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Dividend Stocks

Why You’d Be Smart to Buy This Canadian Bank Stock in 2020

| Kay Ng

You don't need to overthink things to get great investing returns! Here's why you'd be smart to buy Scotiabank (TSX:BNS)(NYSE:BNS)…

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Want to Retire Soon? Then Follow This 3-Step Checklist

| Christopher Liew, CFA

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2 Stocks to Help You Build TFSA Wealth

| Ambrose O'Callaghan

Investors looking to build TFSA wealth in the 2020s should look to stocks like Kinaxis Inc. (TSX:KXS) and Bank of…

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Retirees: How to Earn an Extra $336 Per Month and Avoid OAS Clawbacks by the Canada Revenue Agency

| Andrew Walker

How to protect your OAS pension while earning extra retirement income.

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Buy This Underrated Canadian Bank for CRA-Proof Passive Income

| Joey Frenette

National Bank of Canada (TSX:NA) ought to be the next buy for your TFSA contribution.

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CPP Pension Users: 2 Reasons to Delay Your CPP Until 70

| Christopher Liew, CFA

Bank of Nova Scotia stock and TORC stock can provide the supplementary income if you decide to defer your CPP…

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1 Dividend Stock to Buy and Hold in Your TFSA for the 2020s

| Adam Othman

TFSA income investors should take a close look at stock from Bank of Montreal and consider adding it to their…

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2 High-Yield Canadian Bank ETFs to Supplement Your CPP Pension

| Joey Frenette

BMO Equal Weight Banks ETF (TSX:ZEB) and another high-income ETF that you can bank on!

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2 Cheap Dividend Stocks for RRSP Investors in 2020

| Andrew Walker

Top companies trading at reasonable prices are still available for RRSP investors.

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My #1 Monopoly Stock to Buy for New Year 2020

| Debra Ray

Put the TMX Group Inc (TSX:X) on your list as the number one monopoly stock to buy in 2020 along…

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3 Top Canadian Bank Stocks to Buy for 2020

| Victoria Hetherington

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is the smallest of the Big Five, but is it a better buy?

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TFSA Investors: 2 Reasons Why Your TFSA Is Better Than Your RRSP

| Adam Othman

Learn why the TFSA is much better than the RRSP, and how you can use Scotiabank stocks to capitalize on…

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Retirees: 2 Ways You Can Dodge the 15% OAS Clawback in 2020

| Christopher Liew, CFA

Aside from deferring the CPP, retirees can maximize TFSA to avoid the OAS clawback in 2020. Dividend earnings from the…

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2 Stocks That Are Ideal for a TFSA

| David Jagielski

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a great stock for both dividend- and value-oriented investors.

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The Top 3 Canadian Dividend Stocks for 2020

| Mat Litalien, MBA

Toronto-Dominion Bank's (TSX:TD)(NYSE:TD) stock is among the best dividend stocks in Canada

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Will Bank of Nova Scotia (TSX:BNS) Perform in 2020?

| Matt Smith

Conditions are improving for Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) making now the time to buy.

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Dividend Stocks

CPP Pension Users: Here’s How You Can Increase Your CPP Payments by 42%

| Christopher Liew, CFA

CPP payments increase by 42% if you defer receiving the benefits until age 70. Investing in Royal Bank of Canada…

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Bank Stocks

Will Canada’s Housing Bubble Burst in 2020?

| Matt Smith

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) are exposed to a housing correction if one were to…

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Dividend Stocks

RRSP Investors: Should You Buy TD (TSX:TD) Stock Right Now?

| Andrew Walker

The RRSP contribution deadline for the 2019 tax year is March 2, 2020. Should TD (TSX:TD)(NYSE:TD) stock be on your…

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Dividend Stocks

2 Deeply Oversold Stocks to Buy for Your TFSA

| Adam Othman

Canadian Imperial Bank and Imperial Oil are both oversold royalty stocks you could consider for your TFSA right now.

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TFSA Income: 2 Dividend Stars to Own for Decades

| Andrew Walker

A TFSA income fund is a great way to complement CPP and OAS pension payments.

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Dividend Stocks

TFSA Investors: 3 Great Dividend Stocks Yielding up to 6.3%

| Kay Ng

Here are great value, diversified, dividend stocks, including Enbridge (TSX:ENB)(NYSE:ENB), for your choosing!

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Dividend Stocks

5%-Yield Top Dividend Stocks to Buy in 2020 and Hold Forever

| Kay Ng

Get 5% yields and outperforming total returns by investing in Pembina Pipeline (TSX:PPL)(NYSE:PBA) and Scotiabank (TSX:BNS)(NYSE:BNS) stocks!

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Dividend Stocks

A 2020 Market Crash Could Be Your Chance to Make Millions

| Adam Othman

A market crash is simultaneously the best and worst time for investors. Find out how the potential market crash can…

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Dividend Stocks

RRSP Investors: Is This Canada’s Top Bank Stock for the Next Decade?

| Andrew Walker

Investors often overlook Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) in favour of its larger peers. Is that a mistake?

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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.