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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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| Andrew Walker

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| Andrew Button

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| Chris MacDonald

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| Brian Paradza, CFA

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| 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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| Amy Legate-Wolfe

Retirement can be incredibly stressful, but if you make automated contributions over time, you can create riches quite easily.

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If You’d Invested $5,000 in Royal Bank in 2020, Here’s How Much You’d Have Today

| Ambrose O'Callaghan

A $5,000 investment in Royal Bank (TSX:RY) stock back in July 2020 would net investors very solid returns over the…

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Easy Investing: 2 Canadian Bank Stocks With Nice Dividends and a Reasonable Price

| Joey Frenette

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What’s Next for Royal Bank Stock as the Economy Drifts?

| Amy Legate-Wolfe

Royal Bank (TSX:RY) stock is big but is potentially about to get bigger, offering a huge opportunity for today's investors.

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Better Buy: Canadian Bank Stocks or Fintech Stocks?

| Ambrose O'Callaghan

Canadian bank stocks like Bank of Nova Scotia (TSX:BNS) are the traditional pick, but you shouldn’t sleep on fintech stocks.

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TSX Today: What to Watch for in Stocks on Thursday, July 13

| Jitendra Parashar

The U.S. wholesale inflation report and weekly jobless claims data will remain on TSX Investors’ radar today.

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The Yield on This Canadian Bank Stock Will Make You Smile

| Adam Othman

Financially stable, high-yielding Aristocrats can be powerful additions to your income-producing portfolio.

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The 2 Bank Stocks to Watch as Interest Rates Keep Rising

| Aditya Raghunath

TSX bank stocks such as RBC and National Bank of Canada are well poised to deliver outsized gains to investors…

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If You’d Invested $5,000 in BMO Stock in 2004, Here’s How Much You’d Have Today

| Kay Ng

Bank of Montreal stock is a good buy for income and total returns for long-term investors who can bear risk.

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CPP Benefits: Top Strategies to Capitalize on the Increase

| Christopher Liew, CFA

The higher contribution rates to the two-phase CPP enhancement that began in 2019 will reward future retirees with a larger…

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Is it Time to Buy Bank of Nova Scotia Stock?

| Andrew Button

Bank of Nova Scotia (TSX:BNS) has a 6.4% dividend yield.

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CIBC Analyst Calls Recent Rate Hike a Mistake: Here’s What Investors Can Do Now

| Amy Legate-Wolfe

This CIBC analyst believes the recent hike was either unnecessary or a mistake, but what does this mean for investors?

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Better Buy: Royal Bank of Canada or TD Bank Stock?

| Andrew Walker

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Canada’s Banking Giants: Are These Stocks Worth Your Money Today?

| Kay Ng

Now is a good time to accumulate Canadian bank stocks for long-term accounts, no matter if you seek income or…

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Why Gold Stocks Could Be Like Investing in Cryptocurrency, in a Bad Way

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Gold prices are going up, and the market is going down. But honestly, gold could be as volatile as cryptocurrency…

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Better Buy: Bank of Montreal or Canadian Imperial Bank of Commerce?

| Ambrose O'Callaghan

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Value Investors: Take These 2 Stocks to the Bank

| Joey Frenette

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Is RBC Stock or TD Bank a Better Buy Today?

| Andrew Walker

Royal Bank and TD trade below their 12-month highs. Is one of these top bank stocks now oversold?

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Canadian Income Stocks: The Best Banks for Your Buck

| Andrew Button

Bank stocks like Bank of Montreal may be good buys at today's prices.

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Stocks That Could Catapult Your TFSA Savings to the Next Level

| Christopher Liew, CFA

Canadians can boost their savings and have inflation-fighting power by maximizing their TFSAs.

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| Christopher Liew, CFA

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| Jitendra Parashar

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| Ambrose O'Callaghan

Top Canadian bank stocks like National Bank of Canada (TSX:NA) have achieved long dividend-growth streaks.

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| Amy Legate-Wolfe

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CPP Benefits: Don’t Miss the Coming Increase!

| Andrew Button

Your CPP benefits are about to increase! Here's how to supplement them today using your RRSP or TFSA.

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A New Bull Market Has Arrived – Here’s What I Bought

| Andrew Button

This year I bought bank stocks like the Toronto-Dominion Bank (TSX:TD), along with some foreign stocks and semiconductors.

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Better Buy: Canadian Western Bank or Laurentian Bank?

| Ambrose O'Callaghan

Canadian Western Bank (TSX:CWB) and Laurentian Bank (TSX:LB) both offer nice value and income, but I’m favouring one in particular.

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Better Buy: Royal Bank of Canada or TD Bank Stock?

| Amy Legate-Wolfe

These two large bank stocks are some of the best in the business, but a recent move could send them…

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This Canadian Bank Stock Is Way Undervalued Today

| Andrew Button

Bank of Nova Scotia (TSX:BNS) stock is very undervalued at today's prices.

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The Better Bank Stocks for Your Buck in June 2023

| Joey Frenette

National Bank of Canada (TSX:NA) is just one great bank stock that could perform well in the next five years.

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If you’d invested $5,000 in BMO Stock in 2004, here’s how much you’d have today

| Tony Dong, MSc, CETF®

BMO has historically been a great investment, but I'd rather do this instead.

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Better Buy: Bank of Montreal Stock or Canadian Imperial Bank of Commerce?

| Aditya Raghunath

Both Bank of Montreal and Canadian Imperial Bank of Commerce are trading at a lower valuation. Let's see which TSX…

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1 Dividend Stock With a 4.95% Yield I’d Buy Over Royal Bank Stock Right Now

| Amy Legate-Wolfe

Royal Bank (TSX:RY) stock has seen some pressure in creating capital if it hopes to make an acquisition, yet this…

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TD Bank: The 1 Passive Income Stock That May Be a Better Buy Than GICs

| Joey Frenette

TD Bank stock is just one passive income play that could outperform GICs over the long haul.

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Better Buy: Royal Bank Stock or Scotiabank Shares?

| Joey Frenette

Royal Bank of Canada (TSX:RY) stock and another top banking behemoth that may still be worth considering ahead of a…

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Bank Stocks

Canadian Bank Stocks Won’t Stay This Cheap Forever

| Joey Frenette

TD Bank (TSX:TD) stock is one great value play for long-term investors thinking about big dividends.

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How to Pay Off Debt and Get Rich in 20 Years

| Andrew Button

Once you've paid off all of your high-interest debt, you may wish to consider investing in dividend stocks like Royal…

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Bank Stocks

Is it Time to Buy BNS Stock?

| Andrew Walker

Bank of Nova Scotia just raised its dividend, but the stock remains under pressure. Is BNS stock oversold?

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Bank Stocks

Can TD Bank Stock Rebound to $90 in 2023?

| Andrew Button

Toronto-Dominion Bank (TSX:TD) went over $90 earlier this year. Can it reach that level again?

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CPP Benefits: The Amount Is Set to Increase!

| Andrew Button

CPP payments are set to increase, and dividends from stocks like Royal Bank of Canada may increase even more!

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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.