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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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TSFA or RRSP – Better Place to Stash Cash in 2023?

| Amy Legate-Wolfe

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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TFSA Investors: Why You Should Invest Your Room ASAP With These 3 Stocks

| Adam Othman

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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

RRSP Investors: 2 Cheap Dividend Stocks to Build Retirement Wealth

| Andrew Walker

Here's why Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) and CIBC (TSX:CM)(NYSE:CM) might be interesting RRSP picks right now.

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Young Investors: Here’s Why You Should Pray for a 30% Market Crash

| Adam Othman

A market crash is a bad news, but it is also an excellent time for investors to buy into good…

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Want to Get Your TFSA to $1,000,000? Don’t Make This Mistake!

| David Jagielski

AltaGas Ltd (TSX:ALA) used to be a great dividend stock to own but now there may be too much risk surrounding…

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Millennials: 3 Ways You Are Sabotaging Your Savings

| Christopher Liew, CFA

Instead of holding cash, not keeping track of spending or giving in to peer pressure, millennials can grow savings from…

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2 Tried-and-True Stocks to Buy for a Looming Bear Market

| Christopher Liew, CFA

The threat of recession has diminished but Is not completely gone. Bank of Montreal stock and Fortis stock are the…

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Dividend Stocks

Toronto-Dominion Bank (TSX:TD) Will Benefit From the Fed’s Rate Cut

| Matt Smith

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is poised to soar as the U.S. economy strengthens.

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Bank Stocks

Statistics Canada: You May Be Making a $27,652 TFSA Mistake!

| Andrew Button

If you're not using all your TFSA room, you could miss out on huge savings from dividend stocks like Toronto-Dominion…

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RBC (TSX:RY) Prepares for Brexit in London

| Debra Ray

High-dividend stock Royal Bank of Canada (TSX:RY)(NYSE:RY) reduced its workforce in London to divert resources to areas of higher client…

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Tech Stocks

This FinTech Stock Trend is Moving the Stock Market!

| Debra Ray

Canadian banks like Royal Bank of Canada (TSX:RY)(NYSE:RY) and TD Bank (TSX:TD)(NYSE:TD) consider whether open banking practices endanger consumer information.

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Dividend Stocks

A Top Financial Stock for Your TFSA or RRSP

| Mat Litalien, MBA

goeasy Ltd (TSX:GSY) is the top-performing financial stock on the TSX Index. Expect this outperformance to continue.

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Bank Stocks

1 Massive TFSA Mistake to Avoid in 2020

| Ambrose O'Callaghan

Canadians have fallen in love with TFSAs in the 2010s, but many investors are not using them to their full…

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Dividend Stocks

TD Bank (TSX:TD) Stock Has an Absurd 162-Year Dividend Streak!

| Christopher Liew, CFA

It’s hard to believe that a company has a dividend track record of 162 years. Toronto-Dominion Bank stock has that…

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Dividend Stocks

1 David vs. Goliath Bank Stock to Buy Instead of RBC (TSX:RY)

| Adam Othman

It might be time to look past the Big Six and check out Canadian Western Bank stock, an underdog with…

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2 TSX Index Dividend Stocks to Start a TFSA Pension Fund

| Andrew Walker

Canadians are using their Tax-Free Savings Accounts to build self-directed pension portfolios.

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Dividend Stocks

Looking for Growth Stocks? Try These 4 Disruptive Industries

| Victoria Hetherington

Alternative finance outfits such as goeasy Ltd. (TSX:GSY) could disrupt conventional banking. Here are three other sources of hidden upside.

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Dividend Stocks

Passive-Income Investors: 2 Top Dividend Stocks for Your TFSA

| Andrew Walker

Searching for ways to get the best return from your savings without taking on too much risk?

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Dividend Stocks

Are Canada’s Top Banking Stocks a Buy Heading Into 2020?

| Mat Litalien, MBA

With bank earnings on tap, Bank of Montreal (TSX:BMO)(NYSE:BMO) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are worth a look.

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Tech Stocks

2 Red-Hot TSX Index Stocks at 52-Week Highs I’d Buy Right Now

| Joey Frenette

Kinaxis Inc. (TSX:KXS) and another buyable stock are winners that'll keep on winning through 2020.

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Dividend Stocks

Why Did Canadian Bank Stocks Rally on U.S. Economic Data Last Week?

| Andrew Button

Bank stocks like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) rallied last week after some surprising economic good news.

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Dividend Stocks

Retire Rich: How Canadian Couples Can Turn a $20,000 TFSA Into $350,000

| Andrew Walker

Canadian families are trying to figure out how they can retire in comfort.

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Dividend Stocks

1 Simple Way to Prepare for a Bear Market: Lower Your Risk!

| Christopher Liew, CFA

There’s no way to prevent a bear market, but you can always prepare for it. A simple way is to…

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Retirement Wealth: How to Turn a $20,000 TFSA into $226,000

| Andrew Walker

The way people work is changing, and that requires more planning for the future.

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Millennials: This Simple Financial Tip Could Change Your Life

| Nelson Smith

Ditch the high-interest savings account and buy Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) shares instead. Your wallet will thank you.

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Dividend Stocks

3 Top High-Yield Dividend Stocks for November

| Brian Pacampara, CFA

This trio of top dividend plays, including Toronto-Dominion Bank (TSX:TD)(NYSE:TD), can provide the fat income you need now.

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Dividend Stocks

TFSA Investors: This Small-Cap Bank Stock Is Too Cheap to Ignore!

| Andrew Button

The small Canadian bank, VersaBank (TSX:VB), is extremely cheap despite strong growth metrics

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Bank Stocks

Could CIBC (TSX:CM) Cut Its Dividend?

| Nelson Smith

Think CIBC (TSX:CM)(NYSE:CM) and its 5.1% yield are safe no matter what happens? Think again.

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Bank Stocks

2 Bank Stocks to Watch if the Market Crashes

| Adam Othman

Keep a close eye on two of the Big Six banks of the country, Toronto-Dominion Bank and Bank of Nova…

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2 Incredible Dividend Stocks for Your TFSA

| Adam Othman

Canadian Imperial Bank of Commerce is one of the best dividend-paying stocks you can consider for your TFSA right now.…

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TFSA Wealth: How Canadian Couples Can Generate $577 Per Month in Tax-Free Income

| Andrew Walker

The TFSA is a great tool for Canadian families to generate passive income that isn't shared with the tax authorities.…

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Bank Stocks

Canadian Investors: This #5 Bank Just Surpassed #1!

| Chen Liu

Canadian Imperial Bank of Commerce is the ultimate RRSP an TFSA stock with both capital gains and dividends.

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Dividend Stocks

Canadians Are Drowning in Debt! Learn How to Break Free and Invest

| Christopher Liew, CFA

The secret to being prosperous for life is to put away money and lock it away in Bank of Montreal…

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Better Buy in November: CIBC (TSX:CM) or TD Bank (TSX:TD)?

| Kris Knutson

Buying any of the Canadian banks has proven to be a long-term success strategy over the years. These cash machines…

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Bank Stocks

Could This Be the 1st Victim of Canada’s Housing Market Crash?

| Vishesh Raisinghani

Canada's housing market bubble could leave subprime lender Equitable Group Inc. (TSX:EQB) exposed.

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Dividend Stocks

TFSA Investors: Should You Buy Fortis (TSX:FTS) or CIBC (TSX:CM) for Passive Income?

| Andrew Walker

Fortis Inc. (TSX:FTS)(NYSE:FTS) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) are attracting investor interest. Is one a better income bet…

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Dividend Stocks

Create a Monthly Retirement Stream of $4,000 With This North American All-Star Bank Stock

| Rahim Bhayani

Buy Toronto Dominion Bank (TSX:TD)(NYSE:TD) stock right now to take advantage of its monster 11% annual dividend-growth rate.

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Dividend Stocks

2 Canadian Bank Stocks for Housing Market Contrarians

| Victoria Hetherington

With a potential housing bubble on the horizon, should investors be buying goeasy Ltd. (TSX:GSY) or Bank of Nova Scotia…

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Dividend Stocks

A Top Dividend Growth Stock That Should Pay You for the Rest of Your Life

| Haris Anwar

The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is among the top dividend growth stocks that have the power to generate strong passive income…

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Dividend Stocks

1 Critical Mistake Canadians Need to Stop Making With Their TFSA

| Matt Smith

Add Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) to your TFSA today and build wealth for tomorrow.

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Energy Stocks

Should You Buy Toronto Dominion Bank (TSX:TD) or Suncor Energy (TSX:SU) Stock?

| Andrew Walker

Toronto Dominion Bank (TSX:TD) (NYSE:TD) and Suncor Energy (TSX:SU) are two fo Canada's top companies. Is one a better buy…

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Dividend Stocks

RRSP Wealth: How to Turn $20,000 into a $190,000 Retirement Fund

| Andrew Walker

The need to create a self-directed pension is arguably more important today than it was in the past. Here's how…

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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.