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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?

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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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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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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

This Tiny TSX Stock Is Producing Jaw-Dropping Returns

| Ryan Vanzo

goeasy Ltd (TSX:GSY) stock has skyrocketed by more than 1,000%, yet its small size suggests that these jaw-dropping returns could…

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Dividend Stocks

Top 3 Bank Stocks to Hold During the Next Recession

| Debra Ray

High-dividend-paying and well-capitalized banking institutions like the Royal Bank of Canada (TSX:RY)(NYSE:RY) will only grow in value in the next…

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Dividend Stocks

Forget About the Threat of a Recession: Canada’s Big Banks Will Continue to Perform

| Matt Smith

Royal Bank of Canada (TSX:RY)(NYSE:RY) and National Bank of Canada (TSX:NA) are unlocking value for investors, making now the time…

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TFSA Pension: How a Retired Couple Can Earn $5,080 in Tax-Free Income While Protecting OAS Payments

| Andrew Walker

Holding high-quality dividend stocks inside a TFSA can help Canadian retirees boost income without risking OAS clawbacks. Here's how it…

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Dividend Stocks

TFSA Investors: These 3 Stocks Are Top Pension Approved!

| Nelson Smith

Your portfolio could join the world's largest sovereign wealth fund with investments in Royal Bank of Canada (TSX:RY)(NYSE:RY) and Brookfield…

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Earn $300 a Month for 100 Years Using These Dividend Aristocrats

| Christopher Liew, CFA

Toronto-Dominion Bank (TSX:TD)(NYSE:TD), Bank of Nova Scotia (TSX:BNS)(NYSE: BNS), and BCE (TSX:BCE)(NYSE:BCE) are the dividend aristocrats that can deliver passive…

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Avoid Making This Mistake With Your TFSA

| Matt Smith

Add National Bank of Canada (TSX:NA) to your TFSA today and lock in a 4% dividend yield.

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These 3 Top Stocks Should Be in Your Recession-Proof Portfolio

| Haris Anwar

Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) is among three top stocks that could perform better in a recession.

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Dividend Stocks

Retirees: 2 High-Yield Stocks to Boost Tax-Free Pension Income

| Andrew Walker

Inter Pipeline Ltd. (TSX:IPL) and a top Canadian financial stock appear attractive today for income investors. Here's why.

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Dividend Stocks

2 Income Stocks That Have Paid Dividends for Nearly 200 Years!

| Joey Frenette

Bank of Montreal  (TSX:BMO)(NYSE:BMO) and another dividend aristocrat that investors should look to as volatility picks up.

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Bank Stocks

These 2 Stocks Are Ready for Hyper-Growth for the Next 100 Years

| Ryan Vanzo

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Retire at 55 Using a Simple Plan: Invest in Dividend Stocks

| Christopher Liew, CFA

At age 30, you can start investing in BCE Inc. (TSX:BCE)(NYSE:BCE), Laurentian Bank of Canada (TSX:LB), and American Hotel Income…

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Retirees: Avoid Tax Nightmares When Taking Out Your RRIF

| Christopher Liew, CFA

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are the stocks you should hold in your RRIF to…

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Bank Stocks

When The Next Recession Hits, You Don’t Want to Be Invested in TD (TSX:TD)!

| Chen Liu

If you have Toronto-Dominion Bank (TSX:TD)(NYSE:TD) in your RRSP or TFSA, you want to get out before the next recession!

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Dividend Stocks

Why CIBC (TSX:CM) Is a No-Brainer Buy

| Christopher Liew, CFA

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is a high-quality investment for all generations. You don’t need to exert mental effort…

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Dividend Stocks

1 Bank Stock That Offers a Fat Monthly Dividend

| Adam Othman

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is a banking stock offering high monthly dividends. Let us take a look at…

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Dividend Stocks

The Best Bank Stock for Dividends in 2020 and Beyond

| Kay Ng

This is why Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) may be the best bank for dividend income.

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Dividend Stocks

Attention Pensioners: 2 Stocks to Add $5,842 Per Year in Tax-Free Income

| Andrew Walker

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Energy Stocks

RRSP Investors: Should Royal Bank of Canada (TSX:RY) or Suncor Energy (TSX:SU) Stock Be on Your Buy List?

| Andrew Walker

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Dividend Stocks

TFSA Pension: How to Use Dividend Stocks to Get $330 per Month in Tax-Free Income

| Andrew Walker

Here's how owning dividend stocks such as Inter Pipeline (TSX:IPL) inside a TFSA can help you meet your retirement income…

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3 High-Yield Dividend Stocks to Hold for 100 Years

| Christopher Liew, CFA

Bank of Montreal (TSX:BMO)(NYSE:BMO), Canadian Utilities Limited (TSX:CU), and Enbridge Inc. (TSX:ENB)(NYSE:ENB) are not prominent because of high dividends. You…

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Baby Boomers: Master the CPP to Max Out Your Nest Egg

| Christopher Liew, CFA

Aside from mastering the CPP, baby boomers can set up a supplementary retirement fund by investing in CPP stocks like…

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Why This Analyst Is Wrong About Canadian Banking Stocks

| Nelson Smith

Despite a bearish call from a top Bay Street analyst, I'm still not about to sell my Bank of Nova…

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5 Little Tips Are All You Need to Prepare for the Next Market Crash

| Kay Ng

Here’s how you can prepare for the next market crash with the best businesses, such as Toronto-Dominion Bank (TSX:TD)(NYSE:TD).

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Part 2: The Impact of Lower Rates and a Potential Recession on Canada’s Banking Sector

| Jason Phillips

In part two of this two-part series we look at how the current market environment could threaten to impact the…

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Why Toronto-Dominion Bank (TSX:TD) Stock Could Be in for a Rough Ride in 2020

| David Jagielski

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock has struggled over the past year, and the bad news is that things could get even worse…

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Part 1: What Lower Rates for Longer and the Risk of Recession Mean for Canada’s Banking Sector

| Jason Phillips

In part one of this two-part series, we'll take a look at some of the factors that have contributed to…

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Bank Stocks

RBC (TSX:RY) Returns Over the Last 7 Years Will Make Your Jaw Drop

| Christopher Liew, CFA

Royal Bank of Canada (TSX:RY)(NYSE:RY) is a premiere stock on the TSX. The bank continues to deliver higher-than-market returns in…

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Saving for Retirement? 2 Dividend Stocks to Get You Started

| Ambrose O'Callaghan

Investing beginners should target stable dividend stocks like Hydro One Ltd. (TSX:H) in their retirement portfolios.

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TFSA Investors: 2 Top Dividend Stocks That Look Oversold Right Now

| Andrew Walker

Here's why Bank of Montreal (TSX:BMO)(NYSE:BMO) and a top energy infrastructure stock deserve to be on your radar.

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Why You Shouldn’t Judge a Stock by Its Price

| Debra Ray

When you account for dividends, Power Financial Corporation (TSX:PWF) begins to look more like the best stock an aspiring Canadian…

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2 Stocks That Could Boost Dividends in 2020

| Vishesh Raisinghani

CIBC (TSX:CM)(NYSE:CM) and Fortis Inc. (TSX:FTS)(NYSE:FTS) are both well-positioned for dividend growth in 2020.

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Bank Stocks

Toronto-Dominion Bank (TSX:TD): Should You Buy the Stock on the Dip?

| Andrew Walker

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is down sharply in the past few days. What's going on?

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Dividend Stocks

What Makes Canadian Banking Stocks a Better Buy in a Recession? 

| Haris Anwar

Royal Bank of Canada (TSX:RY)(NYSE:RY) is among the top Canadian stocks to buy when the fear of recession is growing.

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Dividend Stocks

TD Bank (TSX:TD) Is a Gift for Dividend Investors After TD Ameritrade’s Implosion

| Joey Frenette

TD Bank (TSX:TD)(NYSE:TD) plunged nearly 3% on the brokerage sell-off that saw TD Ameritrade (NASDAQ:AMTD) fall 26%. Here's why TD…

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Dividend Stocks

2 Massive Market Game Changers You May Have Missed

| Victoria Hetherington

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and one other market leader have been hit by major moves this week that could have long-term…

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Dividend Stocks

2 Top Dividend Stocks for TFSA Income Investors

| Andrew Walker

Here's why Telus Corporation (TSX:T)(NYSE:TU) and a leading financial institution deserve to be on your income radar today.

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3 Wide-Moat Dividend Stocks to Buy for a TFSA

| Victoria Hetherington

Brookfield Renewable Partners L.P. (TSX:BEP.UN)(NYSE:BEP) and two other market-leading dividend stocks are just right for a long-term portfolio.

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Energy Stocks

2 Super Stocks to Buy in October

| Adam Othman

Two blue-chip companies to consider buying in October: Bank of Montreal (TSX:BMO) (NYSE:BMO) and TC Energy Corp (TSX:TRP).

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3 Blue-Chip TSX stocks to Help You Retire Rich

| Adam Othman

For the safest retirement investments, consider blue-chip stocks: Royal Bank of Canada (TSX:RY)(NYSE:RY), Toronto-Dominion Bank (TSX:TD)(NYSE:TD), and Enbridge Inc (TSX:ENB)(NYSE:ENB).

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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.