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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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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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| 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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Better Buy: RBC Stock or the Entire TSX?

| Brian Paradza, CFA

Buying Royal Bank of Canada (TSX:RY) stock lets you invest like Warren Buffett does, but investing in the entire TSX…

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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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The Ultimate Canadian Bank Stock to Buy in May 2023 and 1 to Run From

| Christopher Liew, CFA

The TSX’s dividend pioneer is genuinely resilient and the ultimate Canadian bank stock to buy in May 2023.

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Why I’m Greedily Buying Canadian Bank Stocks (and 2 I Like Today)

| Andrew Button

Lately I've been buying Canadian bank stocks like Toronto-Dominion Bank (TSX:TD).

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2 Bank Stocks Yielding Over 6%

| Karen Thomas, MSc, CFA

Bank of Nova Scotia is one of the high-yielding Canadian bank stocks to buy for a high yield without excess…

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How 152 Shares of 1 TSX Stock Could Grow Into $1 Million in Savings

| Amy Legate-Wolfe

Even if there is modest growth, this TSX stock can bring you to over $1 million over time by reinvesting…

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Revealed: The #1 Bank Stock on My 2023 Summer Shopping List

| Joey Frenette

TD Bank (TSX:TD) is one of my favourite bank stocks going into the summer months.

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3 Top Canadian Stocks to Watch in May

| Andrew Button

Constellation Software is releasing earnings in May, and will be a stock worth watching for growth potential

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1 Bank Stock You’ll Want to Own Before it Comes Roaring Back

| Joey Frenette

Bank of Montreal (TSX:BMO) stock is getting way too cheap to ignore for investors who like cheap dividend growth.

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

| Andrew Walker

Royal Bank and TD are leaders in the TSX bank sector. Is one stock now oversold?

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This Bank Stock Could Turn 182 Shares Into $13,490 in 2023

| Amy Legate-Wolfe

While the next four months might be rough, I would still invest in this bank stock to easily turn your…

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The U.S. Bank Crisis Isn’t Over: Here’s a Safer Canadian Bank

| Andrew Button

The Royal Bank of Canada is one of the safest banks in the world.

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Better Dividend Buy: Royal Bank Stock or Bank of Nova Scotia Stock?

| Kay Ng

Although BNS stock is riskier, it offers about 53% more income and could provide higher total returns than RBC stock…

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Bank on This: 5 Must-Own Canadian Financial Stocks for 2023

| Andrew Button

EQB Inc (TSX:EQB) is one of Canada's fastest-growing banks, and there are four others that are doing well, too.

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Better Dividend Buy: TD Bank Stock or RBC Stock?

| Amy Legate-Wolfe

These two bank stocks make up the largest of Canadian banks, but when it comes to the dividend, which is…

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2 Dirt-Cheap Canadian Regional Bank Stocks to Buy Before Earnings

| Ambrose O'Callaghan

Canadian Western Bank (TSX:CWB) and Laurentian Bank (TSX:LB) are bank stocks that look undervalued before Q2 earnings.

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Banking on Volatility: 2 Canadian Regional Bank Stocks Worth Watching

| Joey Frenette

Canadian Western Bank and another TSX regional that could be deep with value going into the summer season.

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Better Buy: Royal Bank Stock or Enbridge Stock?

| Andrew Walker

Royal Bank and Enbridge are top TSX dividend stocks.

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3 Safe Stocks for When Interest Rates Are Rising

| Andrew Button

Large, well-capitalized banks like the Toronto-Dominion Bank tend to perform well during periods of rising interest rates.

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Why TD’s Failed Merger Could Be Fantastic for Investors

| Joey Frenette

TD Bank (TSX:TD) stock looks like a great buy, as it moves on from First Horizons to new horizons.

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Better Dividend Buy: Bank of Montreal or CIBC Stock?

| Amy Legate-Wolfe

These two bank stocks have a large dividend to consider, but even so, one may be better in the short…

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Better Buy: TD Bank Stock or Royal Bank Stock?

| Andrew Button

Toronto-Dominion Bank (TSX:TD) and Royal Bank of Canada (TSX:RY) are both great banks. Which is the better buy?

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Better Dividend Buy: Scotia Bank or Royal Bank Stock?

| Vineet Kulkarni

Royal Bank stock has returned 12% in the last decade, compounded annually, almost double that of BNS.

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How to Invest $1,000 in May 2023

| Aditya Raghunath

Make the most of your $1,000 in May 2023! Uncover why investing in TD Bank stock makes perfect sense for…

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1 Bank to Buy and 1 to Avoid in May 2023

| Amy Legate-Wolfe

One of these banks just got a huge influx of cash, but is that enough to keep investors happy for…

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TD’s Merger Just Collapsed – Here’s Why That’s Good News

| Andrew Button

The Toronto-Dominion Bank and First Horizon have agreed to end their merger. Here's why that's good news.

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TD Bank Stock: What to Do Now That its Merger Has Fallen Apart

| Amy Legate-Wolfe

TD (TSX:TD) stock rose slightly, as the company scrapped a US$13.4 billion deal to expand in the United States.

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The Best “Big Six” Canadian Bank Stock to Buy in May 2023

| Amy Legate-Wolfe

This Big Six bank cannot be ignored a moment longer, with far too much growth potentially on the way in…

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TFSA Investors: How to Catch Up and Hit Your Contribution Limit Every Year

| Amy Legate-Wolfe

It's time to get strict with your budget and put cash aside for an emergency, and the TFSA is the…

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Better Buy: Bank of Montreal or Bank of Nova Scotia Stock?

| Ambrose O'Callaghan

Bank of Montreal (TSX:BMO) and Bank of Nova Scotia (TSX:BNS) both offer nice value, but one is a cut above…

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Down 10%, Royal Bank of Canada Stock Is a Steal Today

| Joey Frenette

Royal Bank of Canada (TSX:RY) stock is a top-tier Big Six bank that may be worth the relative premium multiple…

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Top TSX Value Stocks Everyone Else Is Ignoring (But You Shouldn’t)

| Vineet Kulkarni

Here are three super-discounted stocks that offer handsome growth potential.

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3 Top Stocks to Buy in a Once-in-a-Decade Opportunity

| Amy Legate-Wolfe

These three top stocks are stellar buys in this current market, and once this market recovers, you won't see this…

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The Next Bull Market is Coming: This Could Be a Once-in-a-Decade Time to Buy This Stock

| Amy Legate-Wolfe

This stock may be down by 22% in the last year, but has a potential upside of 31% to reach…

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Bank Stocks

Better Buy: TD Bank or Royal Bank?

| Kay Ng

RBC is a top-notch bank and great long-term investment. However, TD Bank is the obvious buy today. Here's the reason.

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Bank Stocks

Better Buy: BMO Stock or TD Stock?

| Andrew Walker

Bank of Montreal and TD are off their 12-month highs. Is one now a good stock to buy?

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Bank Stocks

Better Buy: CIBC Stock or Bank of Nova Scotia Stock?

| Andrew Walker

CIBC and Bank of Nova Scotia trade at discounts to their 12-month highs.

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Bank Stocks

The Best Canadian Bank Stock for Your Buck in April 2023

| Joey Frenette

TD Bank (TSX:TD) stock looks incredibly cheap, as it exercises its options with a recent proposed acquisition.

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Retirees: Here’s How to Boost Your CPP Pension

| Aditya Raghunath

Learn valuable strategies for Canadian retirees to enhance their CPP pensions, ensuring a more comfortable and financially secure retirement.

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Bank Stocks

Better Buy: Royal Bank Stock or TD Stock?

| Andrew Walker

Royal Bank and TD are Canada's largest banks. Is one undervalued right now?

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Bank Stocks

Interest Rates Hold Steady: Here Are 3 Bank Stocks I’m Buying!

| Ambrose O'Callaghan

I’m looking to snatch up undervalued bank stocks like Bank of Montreal and others in this interest rate climate.

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Bank Stocks

Here’s the Next TSX Stock I’m going to Buy

| Amy Legate-Wolfe

This valuable stock won't remain valuable for the rest of 2023, but a dip is coming soon that investors should…

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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.